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The Disparate Nature of Targeted Repurchases: Evidence from Long-Run Performance

Authors

  • Saeyoung Chang,

    1. The authors are from the Department of Finance, University of Nevada, Las Vegas. They appreciate comments from an anonymous referee and the editor of the journal. Chang gratefully acknowledges financial support from Shustek/Vestin Mortgage Summer Research Grant.
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  • Michael J. Sullivan

    Corresponding author
    1. The authors are from the Department of Finance, University of Nevada, Las Vegas. They appreciate comments from an anonymous referee and the editor of the journal. Chang gratefully acknowledges financial support from Shustek/Vestin Mortgage Summer Research Grant.
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* Address for correspondence: Saeyoung Chang, Department of Finance, University of Nevada, Las Vegas, NV 89154, USA.
e-mail: saeyoung.chang@unlv.edu

Abstract

Abstract:  We examine the announcement stock returns and long-run performance of 352 targeted repurchases from 1979 to 1998. For those repurchases of blocks that are non-control related we find a positive announcement stock price response and positive long-run stock performance indicating that these repurchases are timed to occur when the company's shares are undervalued and that the market underreacts to this signal. In contrast, for those repurchases of blocks that are control related we find a negative announcement stock price response and insignificant long-run stock performance indicating that these repurchases occur for a different reason. We conclude that control related repurchases are utilized solely to dismiss potential takeover bids and are not timed when the stock is undervalued.

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