Market Microstructure Changes Around Accelerated Share Repurchase Announcements

Document Type

Article

Language

eng

Format of Original

24 p.

Publication Date

Spring 2013

Publisher

Wiley

Source Publication

Journal of Financial Research

Source ISSN

0270-2592

Abstract

I investigate the impact on trading characteristics of firms announcing share repurchases using a relatively new buyback method—accelerated share repurchases (ASRs). I find that trading costs decrease and market quality improves following an ASR announcement. The improvement in liquidity is not accompanied by significant changes in information asymmetry or price volatility. Multivariate tests show that the change in volatility and the presence of price constraints in the ASR agreement are significant in explaining the changes in spreads, but the reasons given by firms for conducting the ASRs are not. Thus, in the case of ASRs, the announced involvement of an investment bank buying shares on behalf of the firm improves liquidity without significantly affecting the level of information asymmetry.

Comments

Journal of Financial Research, Vol. 36, No.1 (Spring 2013): 91-114. DOI.

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