On the Timing and Execution of Open Market Repurchases

47 Pages Posted: 13 Mar 2001

See all articles by Laurie Krigman

Laurie Krigman

Babson College

Douglas O. Cook

University of Alabama - Culverhouse College of Commerce & Business Administration

J. Chris Leach

University of Colorado at Boulder - Department of Finance

Date Written: November 2000

Abstract

Little is known about the timing and execution of open market repurchases. U.S. firms are under no obligation to disclose when they are trading, and generally report only quarterly changes in shares outstanding. We use 64 firms' supplementally disclosed repurchase trading data to provide the first examination of repurchase timing and execution. Across the days reported in our sample, firms adopted a variety of execution styles ranging from immediate intense repurchasing to delayed and smoothed repurchasing. We find no clear evidence that repurchases are timed to coincide with, precede, or follow, days on which information is released. Within a given repurchase day, we find u-shaped repurchase patterns for NYSE firms and end-of-day repurchasing tendencies for Nasdaq firms. We benchmark the costs and value of a given repurchase program against naive accumulation strategies achieving the same terminal portfolio. While there is considerable variation across the firms, NYSE firms on average beat their benchmarks whereas Nasdaq firms do not. Finally, we document the liquidity impact of open market repurchases. We find that repurchasing contributes to market liquidity by narrowing bid-ask spreads on days when repurchase trades are completed.

Keywords: Repurchases, Timing

JEL Classification: G35

Suggested Citation

Krigman, Laurie and Cook, Douglas O. and Leach, J. Chris, On the Timing and Execution of Open Market Repurchases (November 2000). Available at SSRN: https://ssrn.com/abstract=251854 or http://dx.doi.org/10.2139/ssrn.251854

Laurie Krigman (Contact Author)

Babson College ( email )

Finance Division
321 Tomasso Hall
Babson Park, MA 02457-0310
United States
781-239-4246 (Phone)

Douglas O. Cook

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
205-348-8971 (Phone)
205-348-0590 (Fax)

J. Chris Leach

University of Colorado at Boulder - Department of Finance ( email )

Campus Box 419
Boulder, CO 80309-0419
United States
303-492-5665 (Phone)
303-492-5962 (Fax)

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