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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Bibliographic Details
Published inThe Journal of financial research Vol. 36; no. 1; pp. 91 - 114
Main Author Kulchania, Manoj
Format Journal Article
LanguageEnglish
Published Columbia Blackwell Publishing Ltd 2013
Blackwell Publishing
Wiley Subscription Services, Inc
Subjects
Online AccessGet full text
ISSN0270-2592
1475-6803
DOI10.1111/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.
Bibliography:ArticleID:JFIR12004
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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
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ISSN:0270-2592
1475-6803
DOI:10.1111/j.1475-6803.2013.12004.x