Voluntary disclosures around share repurchases

Voluntary disclosures around share repurchases Managers increase the frequency and magnitude of bad news announcements during the 1-month period prior to repurchasing shares. To a lesser extent, they also increase the frequency and magnitude of good news announcements during the 1-month period following their repurchases. These results are consistent with Barclay and Smith's (1988. Corporate payout policy: Cash dividends versus open-market repurchases. Journal of Financial Economics 22, 61–82.) conjecture that share repurchases, unlike dividends, create incentives for managers to manipulate information flows. We further show that managers provide downward-biased earnings forecasts before repurchases and that managers’ propensity to alter information flows prior to share repurchases increases with their ownership interest in the firm. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

Voluntary disclosures around share repurchases

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Publisher
Elsevier
Copyright
Copyright © 2008 Elsevier B.V.
ISSN
0304-405x
D.O.I.
10.1016/j.jfineco.2007.08.004
Publisher site
See Article on Publisher Site

Abstract

Managers increase the frequency and magnitude of bad news announcements during the 1-month period prior to repurchasing shares. To a lesser extent, they also increase the frequency and magnitude of good news announcements during the 1-month period following their repurchases. These results are consistent with Barclay and Smith's (1988. Corporate payout policy: Cash dividends versus open-market repurchases. Journal of Financial Economics 22, 61–82.) conjecture that share repurchases, unlike dividends, create incentives for managers to manipulate information flows. We further show that managers provide downward-biased earnings forecasts before repurchases and that managers’ propensity to alter information flows prior to share repurchases increases with their ownership interest in the firm.

Journal

Journal of Financial EconomicsElsevier

Published: Jul 1, 2008

References

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