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The Disparate Nature of Targeted Repurchases: Evidence from Long‐Run Performance

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  • Saeyoung Chang
  • Michael J. Sullivan

Abstract

We examine the announcement stock returns and long‐run performance of 352 targeted repurchases from 1979 to 1998. For those repurchases of blocks that are non‐control related we find a positive announcement stock price response and positive long‐run stock performance indicating that these repurchases are timed to occur when the company's shares are undervalued and that the market underreacts to this signal. In contrast, for those repurchases of blocks that are control related we find a negative announcement stock price response and insignificant long‐run stock performance indicating that these repurchases occur for a different reason. We conclude that control related repurchases are utilized solely to dismiss potential takeover bids and are not timed when the stock is undervalued.

Suggested Citation

  • Saeyoung Chang & Michael J. Sullivan, 2007. "The Disparate Nature of Targeted Repurchases: Evidence from Long‐Run Performance," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(1‐2), pages 65-77, January.
    • Handle: RePEc:bla:jbfnac:v:34:y:2007:i:1-2:p:65-77
    DOI: 10.1111/j.1468-5957.2006.00661.x
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    References listed on IDEAS

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    Cited by:

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    2. Hussein Abedi Shamsabadi & Byung S. Min & Imen Tebourbi & Mohammad Nourani, 2020. "Corporate Governance in Australia: Share Repurchases under an Imputation Tax System," Capital Markets Review, Malaysian Finance Association, vol. 28(1), pages 1-23.
    3. Firth, Michael & Leung, T.Y. & Rui, Oliver M., 2010. "Double signals or single signal? An investigation of insider trading around share repurchases," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(4), pages 376-388, October.

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