a1 Gatton College of Business and Economics, University of Kentucky, Lexington, KY 40506. email@example.com
This paper examines whether a firm’s reputation is a determinant of repurchase completion rates (the ratio of actual to announced repurchases) and whether the stock market discounts announcements made by less reputable firms. Prior completion rates are positively correlated with current completion rates and announcement returns, suggesting consistency in repurchases and implying a reputational effect. Further, a nascent literature regarding accelerated share repurchases (ASRs) finds them to be more credible than open market repurchases. I show that the probability of announcing an ASR is greater for firms likely to be concerned about reputation because of low past completion rates.
(Online publication January 17 2012)
I am grateful for the valuable comments and suggestions of David Brown, Jonathan Cohn (the referee), Sarah Hamersma, Jason Karceski, Paul Malatesta (the editor), Jacob Oded, Michael Ryngaert, and seminar participants at the University of Florida and the University of Kentucky. All errors are my own.