A Comprehensive Examination of the Wealth Effects of Recent Stock Repurchase Announcements
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In this paper we examine the wealth effect of stock repurchase announcements using a sample of 11,862 repurchase programs announced during 1994-2007. The results of several recent industry surveys indicate that managerial motivations for repurchasing shares may have changed in recent years. To better understand the reasons for repurchasing shares we classify our sample in various ways - by year, by the method used for repurchasing shares, by the stated purpose of the program, by the method of financing, and by program size. We find that the median size of firms repurchasing shares has increased dramatically recently, and concomitantly, the announcement returns have declined. Signaling undervaluation of share prices appears to become less important than previously assumed. While smaller firms signal undervaluation using open market repurchases, tender offers are chosen to enhance shareholder values by other means.