MARKET MICRSOTRUCTURE CHANGES AROUND ACCELERATED SHARE REPURCHASE ANNOUNCEMENTS
I investigate the impact on trading characteristics of firms announcing share repurchases using a relatively new buyback method—accelerated share repurchases (ASRs). I find that trading costs decrease and market quality improves following an ASR announcement. The improvement in liquidity is not acco...
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Published in | The Journal of financial research Vol. 36; no. 1; pp. 91 - 114 |
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Main Author | |
Format | Journal Article |
Language | English |
Published |
Columbia
Blackwell Publishing Ltd
2013
Blackwell Publishing Wiley Subscription Services, Inc |
Subjects | |
Online Access | Get full text |
ISSN | 0270-2592 1475-6803 |
DOI | 10.1111/j.1475-6803.2013.12004.x |
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Summary: | I investigate the impact on trading characteristics of firms announcing share repurchases using a relatively new buyback method—accelerated share repurchases (ASRs). I find that trading costs decrease and market quality improves following an ASR announcement. The improvement in liquidity is not accompanied by significant changes in information asymmetry or price volatility. Multivariate tests show that the change in volatility and the presence of price constraints in the ASR agreement are significant in explaining the changes in spreads, but the reasons given by firms for conducting the ASRs are not. Thus, in the case of ASRs, the announced involvement of an investment bank buying shares on behalf of the firm improves liquidity without significantly affecting the level of information asymmetry. |
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Bibliography: | ArticleID:JFIR12004 istex:4267ACA23D3120D4A019DFF6C4DD5ED6DCFB3F4C ark:/67375/WNG-61ZKJZ4H-K I thank Leonce Bargeron, Marcus Braga-Alves, Paul Brockman (the referee), Vidhan Goyal, Ahmet Kurt, Ken Lehn, Marios Panayides, Kuldeep Shastri, Shawn Thomas, Chad Zutter, and seminar participants at Marquette University and the University of Pittsburgh for helpful comments and suggestions. Any errors remain my own. SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 14 |
ISSN: | 0270-2592 1475-6803 |
DOI: | 10.1111/j.1475-6803.2013.12004.x |