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 language | English |
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Pages (from-to) | 6568-6580 |
Number of pages | 13 |
Journal | Management Science |
Volume | 67 |
Issue number | 10 |
DOIs | |
State | Published - 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