Stock Repurchases in Canada: Performance and Strategic Trading

Authors

  • David Ikenberry,

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    • Ikenberry is at Rice University and was a visiting scholar at the University of Washington while working on this paper. Lakonishok is at the University of Illinois and the National Bureau of Economic Research. Vermaelen is at INSEAD and Maastricht University. We appreciate the research assistance of Pricha Sethapakdi. Timothy Baikie, Special Counsel Market Regulation at the Toronto Stock Exchange, was helpful in providing data and background information about Canadian repurchases. We also thank Dino Mastroianni and Vinod Chandrashekaran from BARRA for their help and comments. We appreciate the comments of René Stulz (the editor), an anonymous referee, Louis Chan, Ken French, Ravi Jagannathan, Narasimhan Jegadeesh, Jason Karceski, Inmoo Lee, Raghu Rau, Cliff Stephens, Sheridan Titman, and seminar participants at Catholic University Leuven, the University of Washington, and the University of Texas.
  • Josef Lakonishok,

    Search for more papers by this author
    • Ikenberry is at Rice University and was a visiting scholar at the University of Washington while working on this paper. Lakonishok is at the University of Illinois and the National Bureau of Economic Research. Vermaelen is at INSEAD and Maastricht University. We appreciate the research assistance of Pricha Sethapakdi. Timothy Baikie, Special Counsel Market Regulation at the Toronto Stock Exchange, was helpful in providing data and background information about Canadian repurchases. We also thank Dino Mastroianni and Vinod Chandrashekaran from BARRA for their help and comments. We appreciate the comments of René Stulz (the editor), an anonymous referee, Louis Chan, Ken French, Ravi Jagannathan, Narasimhan Jegadeesh, Jason Karceski, Inmoo Lee, Raghu Rau, Cliff Stephens, Sheridan Titman, and seminar participants at Catholic University Leuven, the University of Washington, and the University of Texas.
  • Theo Vermaelen

    Search for more papers by this author
    • Ikenberry is at Rice University and was a visiting scholar at the University of Washington while working on this paper. Lakonishok is at the University of Illinois and the National Bureau of Economic Research. Vermaelen is at INSEAD and Maastricht University. We appreciate the research assistance of Pricha Sethapakdi. Timothy Baikie, Special Counsel Market Regulation at the Toronto Stock Exchange, was helpful in providing data and background information about Canadian repurchases. We also thank Dino Mastroianni and Vinod Chandrashekaran from BARRA for their help and comments. We appreciate the comments of René Stulz (the editor), an anonymous referee, Louis Chan, Ken French, Ravi Jagannathan, Narasimhan Jegadeesh, Jason Karceski, Inmoo Lee, Raghu Rau, Cliff Stephens, Sheridan Titman, and seminar participants at Catholic University Leuven, the University of Washington, and the University of Texas.

Abstract

During the 1980s, U.S. firms announcing stock repurchases earned favorable long-run returns. Recently, concerns have been raised over the robustness of these findings. This concern comes at a time of explosive growth in repurchase programs. Thus, we study new evidence from the 1990s for 1,060 Canadian repurchase programs. Moreover, because of Canadian law, we can carefully track repurchase activity monthly. Similarly to the situation in the United States, the Canadian stock market discounts the information in repurchase announcements, particularly for value stocks. Completion rates in Canada are sensitive to mispricing. Trades also appear linked to price movements; managers buy more shares when prices fall.

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