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Stock repurchases with legal restrictions. Evidence from Spain

Author

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  • Victor Gonzalez
  • Francisco Gonzalez

Abstract

This paper analyses the consequences of legal restrictions on the volume of shares firms can repurchase. Results suggest that the imposition of a limit on the volume of common stock favours the use of open market repurchases (OMRs) compared to other methods of repurchase such as tender offer repurchases (TORs) and Dutch auctions (DAs). The positive share abnormal returns around both announcements of open market buybacks and sellbacks in the full sample suggest that they are basically used to change the ownership structure of the firm in a consistent way with the convergence of interest hypothesis. The positive abnormal stock returns around open market repurchases, which are significantly different to the negative ones around sellbacks, when there are no changes in ownership structure also indicates the existence of a signalling and free cash flow effects.

Suggested Citation

  • Victor Gonzalez & Francisco Gonzalez, 2004. "Stock repurchases with legal restrictions. Evidence from Spain," The European Journal of Finance, Taylor & Francis Journals, vol. 10(6), pages 526-541.
    • Handle: RePEc:taf:eurjfi:v:10:y:2004:i:6:p:526-541
    DOI: 10.1080/13518470410001674341
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    Cited by:

    1. Mustafa Erdem Sakinç, 2017. "Share Repurchases in Europe A Value Extraction Analysis," CEPN Working Papers hal-03987909, HAL.
    2. Mustafa Erdem Sakinç, 2017. "Share Repurchases in Europe A Value Extraction Analysis," Working Papers hal-03987909, HAL.

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