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Inflexibility of Share Repurchases *
Author(s) -
Yamaguchi Satoru
Publication year - 2021
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/irfi.12267
Subject(s) - share repurchase , flexibility (engineering) , business , open market operation , authorization , market share , monetary economics , finance , economics , corporate governance , shareholder , management , computer science , computer security , monetary policy
This paper investigates the flexibility inherent in open market share repurchases. Open market share repurchases are recognized as being flexible, since managers believe that they are not an ongoing commitment. However, I find that such returns significantly decrease upon announcing the completion of a repurchase program if firms do not concurrently announce new program authorizations. I also find that announcement returns significantly decline with completion rates and that a high completion rate acts as a negative signal, revealing that firms have finished the repurchasing activities and do not intend to continue share repurchasing in the foreseeable future. These results indicate that share repurchases are less flexible than they were previously thought to be.