Do firms buy their stock at bargain prices? evidence from actual stock repurchase disclosures

Azi Ben-Rephael, Jacob Oded, Avi Wohl

Research output: Contribution to journalArticlepeer-review

52 Scopus citations

Abstract

Using new monthly data, we investigate open-market repurchase executions of US firms. We find that firms repurchase at prices that are significantly lower than average market prices. This price discount is negatively related to size and positively related to market- To-book ratio. Firms' repurchase activity is followed by a positive and significant abnormal return. Importantly, the market response occurs when firms disclose their actual repurchase data in earnings announcements, and this positive response is followed by a 1-month drift. Consistent with these results, we find that insider trading is positively related to actual repurchases.

Original languageEnglish
Pages (from-to)1299-1340
Number of pages42
JournalReview of Finance
Volume18
Issue number4
DOIs
StatePublished - 1 Jul 2014

Funding

FundersFunder number
Israel Science Foundation and Henry Crown Institute of Business Research

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