We examine long-run firm performance following open market share repurchase announcements, 1980-1990. We find that the average abnormal four-year buy-and-hold return measured after the initial announcement is 12.1%. For ‘value ’ stocks, companies more likely to be repurchasing shares because of undervaluation, the average abnormal return is 45.3%. For repurchases announced by ‘glamour ’ stocks, where undervaluation is less likely to be an important motive, no positive drift in abnormal returns is observed. Thus, at least with respect to value stocks, the market errs in its initial response and appears to ignore much of the information conveyed through repurchase announcements.

Using a comprehensive database of headlines about individual companies, I examine monthly returns following public news. I compare them to stocks with similar returns, but no identifiable public news. There is a di#erence between the two sets. I find strong drift after bad news. Investors seem to react slowly to this information. I also find reversal after extreme price movements unaccompanied by public news. The separate patterns appear even after adjustments for risk exposure and other e#ects. They are, however, mainly seen in smaller, more illiquid stocks. These findings support some integrated theories of investor over- and underreaction.

During the 1980s, U.S. firms announcing stock repurchases earned favorable long-run returns. Recently, concerns have been raised over the robustness of these findings. This concern comes at a time of explosive growth in repurchase programs. Thus, we study new evidence from the 1990s for 1,060 Canadian repurchase programs. Moreover, because of Canadian law, we can carefully track repurchase activity monthly. Similar to the U.S., the Canadian stock market discounts the information in repurchase announcements, particularly for value stocks. Completion rates in Canada are sensitive to mispricing. Trades also appear linked to price movements; managers buy more shares when prices fall. 1 In recent years, corporations have dramatically increased the amount of capital devoted to repurchasing their own shares. In the mid-1980s, repurchase program announcements in the U.S. amounted to roughly $25 billion per year. Between 1996 and 1998 however, more than 4,000 open market repurchase programs w...

I test whether there is a link between the poor post-event performance of SEOs and shortsale constraints. I find that SEOs have a higher and statistically significant probability of being on special (high short-sale costs) in the 36 months after issuance. Thus, shorting demand appears to be high for issuers in the post-issuance period. I also provide indirect evidence using potential proxies for opinion divergence. Issuers with high pre-event volume, high preevent dispersion in analysts ’ forecasts, or large reductions in ownership breadth experience significantly low subsequent returns. However, issuers with low pre-event volume, dispersion in analysts ’ forecasts, or no reduction in ownership breadth do not significantly underperform. I also find that the post-event performance of issuers is not unique. Most of the abnormal performance of issuers is explained by the performance of non-issuers with similar market equity and trading volume.

Many parents that carve out units eventually restake. While previous literature reports a positive market reaction to parents conducting carve-outs, we find that the response to carve-outs is negative or insignificant for parents who ultimately restake in the carved-out unit. The stock-price performance for both the parent and unit is poor in the period following the carve-out, and units that are subsequently restaked perform considerably worse than their counterpart units that are not restaked. The announcement of the restaking is met with a favorable market reaction for both the parent and the unit. The announcement effects are less favorable when the parent’s recent ROA is strong and when the unit has relatively high debt to total assets and price to book ratios. Unit announcement effects are more favorable when it is completely restaked and when the parent is in a related line of business, and less favorable when unit ROA and cash to total asset ratios are high. Moreover, the parent firm’s performance following complete restaking is strong, which suggests that parents who fully restake the unit are able to best enhance value.

data. Scott Baggett was extremely helpful with data support. This paper was previously titled