The price effect of stock repurchases: Evidence from dual class firms

Leonce Bargeron, Michael Farrell

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

We examine a sample of dual-class firms to isolate the magnitude and duration of the demand-driven price effect from stock repurchases. In this novel setting, the non-repurchased class serves as a near-perfect counterfactual to the repurchased class and controls for private information about firm value contained in the repurchases. The average repurchase in our sample, 0.30% of outstanding shares within a month, increases the stock price by 40 to 70 basis points relative to the non-repurchased class of stock. The effect dissipates completely over the subsequent month unless extended by continued repurchases. This small, short-lived price effect leaves little scope for CEOs to benefit from value-destroying repurchases motivated by self-interest.

Original languageEnglish
Pages (from-to)6568-6580
Number of pages13
JournalManagement Science
Volume67
Issue number10
DOIs
StatePublished - Nov 2021

Bibliographical note

Publisher Copyright:
© 2021 INFORMS

Keywords

  • Agency
  • Dual class
  • Price effect
  • Repurchases

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

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