Voluntary Disclosures Regarding Open Market Repurchase Programs

• In Event: Voluntary Disclosure - Textual Analysis

Abstract

This paper examines firms’ voluntary disclosures regarding open market repurchase programs, i.e., announcements that firms have suspended, resumed, or completed repurchases. We find that abnormal returns around announcements are, on average, positive when firms voluntarily announce repurchase resumption and completion with new authorization, and negative when firms announce repurchase suspension and completion without new authorization. These findings suggest that the voluntary disclosures are informative and that investors expect repurchase continuity, implying less flexibility in repurchases than previously thought. Companies are more likely to provide status updates when the updates are more informative to investors and when companies have stronger incentives to establish reputations for transparency. Consistent with benefits to reputations for transparency, abnormal returns for repurchase authorizations following firms’ voluntarily announced suspensions of prior programs are significantly more positive than those for firms that could have announced suspensions but did not.

Authors

• Leonce Bargeron, University of Kentucky

• Alice Bonaime, University of Arizona

• Mei Feng, University of Pittsburgh

• Shawn Thomas, University of Pittsburgh