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The Effect Of Self-Tender Offers On Earnings Expectations

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Listed:
  • Ronald W. Best
  • Roger J. Best
  • Charles W. Hodges

Abstract

We examine financial analysts' earnings revisions after self-tender offers. Consistent with the assertions of earlier studies that self-tender offers signal future performance, financial analysts significantly increase their forecasts of earnings for firms that announce self-tender offers. However, the revisions differ based on the method chosen to repurchase shares. For Dutch auction offers, analysts significantly revise their estimates of short-term earnings only. For fixed-price tender offers, analysts increase both short-term and long-term earnings estimates. Also, long-term earnings revisions are significantly related to announcement-period abnormal returns for fixed-price tender offers, which suggests that fixed-price self-tender offers convey more positive information about future earnings than do Dutch auction offers.

Suggested Citation

  • Ronald W. Best & Roger J. Best & Charles W. Hodges, 1998. "The Effect Of Self-Tender Offers On Earnings Expectations," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 21(2), pages 123-138, June.
    • Handle: RePEc:bla:jfnres:v:21:y:1998:i:2:p:123-138
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    File URL: http://hdl.handle.net/10.1111/j.1475-6803.1998.tb00676.x
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    References listed on IDEAS

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    1. Elena Katok & Alvin E. Roth, 2004. "Auctions of Homogeneous Goods with Increasing Returns: Experimental Comparison of Alternative "Dutch" Auctions," Management Science, INFORMS, vol. 50(8), pages 1044-1063, August.

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