Share Repurchase Offers and Liquidity: An Examination of Temporary and Permanent Effects
Authors: Nayar, Nandkumar1; Singh, Ajai K.2; Zebedee, Allan A.3
Source: Financial Management, Volume 37, Number 2, Summer 2008 , pp. 251-270(20)
Publisher: Blackwell Publishing
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Abstract:
Open-market repurchase programs do not allow for precise estimates of share buy-back intensity to measure liquidity effects. To circumvent the uncertainty surrounding the quantity and timing of shares truly acquired in repurchase programs and to measure their long-term impact, we examine Dutch auctions and fixed-price tender offers. We investigate both the temporary and permanent liquidity effects of share repurchase programs and find that the improvement in liquidity is transitory and limited to the tender period when the firm's offer to repurchase shares is outstanding. Improvements in liquidity over longer intervals appear to be the result of an overall price improvement and a reduction in volatility rather than the result of structural change in market dynamics.Document Type: Research article
DOI: 10.1111/j.1755-053X.2008.00012.x
Affiliations: 1: Nandkumar Nayar is a Professor of Finance at Lehigh University in Bethlehem, PA. 2: Ajai K. Singh is a Professor of Finance at Case Western Reserve University in Cleveland, OH. 3: Allan A. Zebedee is an Assistant Professor of Finance at Clarkson University in Potsdam, NY.
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