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The Relative Signalling Power of Dutch‐Auction and Fixed‐Price Self‐Tender Offers and Open‐Market Share Repurchases

The Relative Signalling Power of Dutch‐Auction and Fixed‐Price Self‐Tender Offers and Open‐Market... ABSTRACT We compare three forms of common stock repurchases. Dutch‐auction self‐tender offers and open‐market share repurchase programs are weaker signals of stock undervaluation than fixed‐price self‐tender offers. The price increase from buyback announcements is greater when insider wealth is at risk, greater following negative net‐of‐market stock returns, and unrelated to prior market returns. Buyback announcement returns are also increasing in the fraction of shares sought, which is consistent with both signalling and an upward‐sloping supply curve for stock. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

The Relative Signalling Power of Dutch‐Auction and Fixed‐Price Self‐Tender Offers and Open‐Market Share Repurchases

The Journal of Finance , Volume 46 (4) – Sep 1, 1991

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Publisher
Wiley
Copyright
1991 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1991.tb04617.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT We compare three forms of common stock repurchases. Dutch‐auction self‐tender offers and open‐market share repurchase programs are weaker signals of stock undervaluation than fixed‐price self‐tender offers. The price increase from buyback announcements is greater when insider wealth is at risk, greater following negative net‐of‐market stock returns, and unrelated to prior market returns. Buyback announcement returns are also increasing in the fraction of shares sought, which is consistent with both signalling and an upward‐sloping supply curve for stock.

Journal

The Journal of FinanceWiley

Published: Sep 1, 1991

References