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The Disparate Nature of Targeted Repurchases: Evidence from Long‐Run Performance
Author(s) -
Chang Saeyoung,
Sullivan Michael J.
Publication year - 2007
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.2006.00661.x
Subject(s) - stock (firearms) , stock price , monetary economics , business , control (management) , economics , biology , management , mechanical engineering , paleontology , series (stratigraphy) , engineering
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.