Accelerated share repurchases

Leonce Bargeron, Manoj Kulchania, Shawn Thomas

Research output: Contribution to journalArticlepeer-review

35 Scopus citations

Abstract

Accelerated share repurchases (ASRs) are credible commitments by firms to repurchase shares immediately. Including an ASR in a repurchase program reduces the flexibility that firms have to alter an announced program in response to subsequent changes in the price and liquidity of its shares, unexpected shocks to cash flow and/or investment, etc. Thus, we investigate whether firms' decisions to include ASRs in their repurchase programs are associated with factors expected to influence the costs of lost flexibility and the benefits of enhanced credibility and immediacy. We find robust evidence consistent with the costs of lost flexibility and the benefits of credibility and immediacy being important determinants of ASR adoption. Additionally, we find that ASR announcements are associated with positive average abnormal stock returns.

Original languageEnglish
Pages (from-to)69-89
Number of pages21
JournalJournal of Financial Economics
Volume101
Issue number1
DOIs
StatePublished - Jul 2011

Keywords

  • Accelerated share repurchase
  • Liquidity
  • Payout policy

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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