share repurchases

We compare accelerated share repurchases (ASR) and open market repurchases (OMR) between 2004 and 2007. ASR firms had lower market-to-book ratios, less cash, and higher managerial entrenchment. ASR firms were subject to more takeover rumors, influencing their choice. ASR firms experienced positive returns and reduced takeover probability.

Analyzing Australian companies’ stock repurchases based on their motivations, we find that firms with undervaluation motives have a more positive stock price reaction. These firms repurchase fewer shares and perform better in the year following repurchases. Undervaluation motives signal strength, and management statements hold value for the market.