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The Timing and Source of Long-Run Returns Following Repurchases

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  • Bargeron, Leonce
  • Bonaime, Alice
  • Thomas, Shawn

Abstract

This paper investigates the timing and source of anomalous positive long-run abnormal returns following repurchase authorizations. Returns between program authorization and completion announcements are indistinguishable from 0. Abnormal returns occur only after completion announcements. Long-run returns are largely attributable to announcement returns at subsequent authorizations and takeover attempts; that is, anomalous post-authorization returns are not persistent drifts but rather step functions. These findings have important implications for prior papers examining this most persistent and widespread anomaly. Further, our results serve to refocus the search for a rational explanation for the anomaly on subsequent repurchase announcements and takeover bids.

Suggested Citation

  • Bargeron, Leonce & Bonaime, Alice & Thomas, Shawn, 2017. "The Timing and Source of Long-Run Returns Following Repurchases," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(2), pages 491-517, April.
  • Handle: RePEc:cup:jfinqa:v:52:y:2017:i:02:p:491-517_00
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    Cited by:

    1. Clarke, Nicholas, 2022. "It's just a matter of time: Abnormal returns after firms stop repurchasing shares," Finance Research Letters, Elsevier, vol. 49(C).
    2. Alice Bonaimé & Jarrad Harford & Jarrad Harford, 2020. "Payout Policy Trade-Offs and the Rise of 10b5-1 Preset Repurchase Plans," Management Science, INFORMS, vol. 66(6), pages 2762-2786, June.
    3. Cook, Douglas O. & Zhang, Weiwei, 2022. "CEO option incentives and corporate share repurchases," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 355-376.
    4. Ma, Pengfei & Li, Chengcheng & Wang, Xiaoqiong, 2024. "Why do undervalued firms repurchase shares? Evidence based on the market-timing effect in China," Global Finance Journal, Elsevier, vol. 59(C).
    5. Lee, Inmoo & Park, Yuen Jung & Pearson, Neil D., 2020. "Repurchases after being well known as good news," Journal of Corporate Finance, Elsevier, vol. 62(C).
    6. Jha, Anand & Kulchania, Manoj & Kwon, Min-Jeong, 2022. "Stock repurchasing and corporate social responsibility," Journal of Financial Stability, Elsevier, vol. 62(C).
    7. Su, Xuan-Qi & Lin, Yung-Chieh & Chen, Chin-Ming & Lowe, Alpha, 2019. "Are educational managers credible or overconfident? Evidence from share repurchases in Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 56(C), pages 93-112.
    8. Autore, Don M. & Clarke, Nicholas & Liu, Baixiao, 2019. "Activist investors and open market share repurchases," Journal of Banking & Finance, Elsevier, vol. 107(C), pages 1-1.
    9. Moore, David, 2023. "Strategic repurchases and equity sales: Evidence from equity vesting schedules," Journal of Banking & Finance, Elsevier, vol. 146(C).

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