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Repurchases, Reputation, and Returns

Published online by Cambridge University Press:  17 January 2012

Alice Adams Bonaimé
Alice Adams Bonaimé*
Affiliation:
Gatton College of Business and Economics, University of Kentucky, Lexington, KY 40506. alice.bonaime@uky.edu
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Abstract

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.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 47 , Issue 2 , April 2012 , pp. 469 - 491
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2012

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