Hostname: page-component-76fb5796d-5g6vh Total loading time: 0 Render date: 2024-04-28T20:06:23.469Z Has data issue: false hasContentIssue false
  • English
  • Français

Open-Market Share Repurchase Programs and Bid-Ask Spreads on the NYSE: Implications for Corporate Payout Policy

Published online by Cambridge University Press:  06 April 2009

James M. Miller  and
John J. McConnell
James M. Miller
Affiliation:
College of Commerce and Industry, Clemson University, Clemson, SC 29634
John J. McConnell
Affiliation:
Krannert Graduate School of Management, Purdue University, West Lafayette, IN 47907
Get access Rights & Permissions [Opens in a new window]

Abstract

This study analyzes bid-ask spreads surrounding announcements of open-market share repurchase programs for a sample of 248 announcements of repurchase programs by NYSE firms over the period January 1984 through June 1988. The sample includes 158 announcements of new programs and 90 announcements regarding continuations of already existing programs. Contrary to the theory that spreads increase surrounding the announcement of open-market share repurchase programs, with both univariate and multivariate tests that control for changes in volume, changes in stock price volatility, and changes in the level of stock price, we find no evidence of an increase in spreads surrounding announcements of open-market share repurchase programs.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 30 , Issue 3 , September 1995 , pp. 365 - 382
Copyright
Copyright © School of Business Administration, University of Washington 1995

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Amihud, Y., and Mendelson, H.. “Asset Pricing and the Bid-Ask Spread.” Journal of Financial Economics, 17 (1986), 223–249.CrossRefGoogle Scholar
Amihud, Y.; Mendelson, H.; and Wood, R. A.. “Liquidity and the 1987 Stock Market Crash.” Journal of Portfolio Management, 16 (1990), 65–69.CrossRefGoogle Scholar
Bagwell, L. S. “Dutch Auction Repurchases: An Analysis of Shareholder Heterogeneity.” Journal of Finance, 47 (1992), 71–105.CrossRefGoogle Scholar
Bagwell, L. S., and Shoven, J. B.. “Cash Distributions to Shareholders.” Journal of Economic Perspectives, 3 (1989), 129–140.CrossRefGoogle Scholar
Barclay, M., and Smith, C. W. Jr. “Corporate Payout Policy: Cash Dividends versus Open-Market Repurchases.” Journal of Financial Economics, 22 (1988), 61–82.CrossRefGoogle Scholar
Benston, G. J., and Hagerman, R. L.. “Determinants of Bid-Ask Spreads in the Over-the-Counter Market.” Journal of Financial Economics, 1 (1974), 353–363.CrossRefGoogle Scholar
Christie, W. G., and Schultz, P.. “Why Don't NASDAQ Market Makers Use Odd Eighths.” Journal of Finance, 49 (1994), 1999–2014.Google Scholar
Clark, R.; McConnell, J. J.; and Singh, M.. “Seasonalities in NYSE Bid/Ask Spreads and Stock Returns in January.” Journal of Finance, 47 (1992), 1999–2014.Google Scholar
Comment, R., and Jarrell, G. A.. “The Relative Signalling Power of Dutch-Auction and Fixed-Priced Self-Tender Offers and Open-Market Share Repurchases.” Journal of Finance, 46 (1991), 1243–1271.Google Scholar
Copeland, T., and Galai, D.. “Information Effects on the Bid-Ask Spread.” Journal of Finance, 25 (1983), 383–417.Google Scholar
Dann, L. Y. “Common Stock Repurchase: An Analysis of Returns to Bondholders and Stockholders.” Journal of Financial Economics, 9 (1981), 113–138.CrossRefGoogle Scholar
Demsetz, H. “The Cost of Transacting.” Quarterly Journal of Economics, 82 (1968), 44–54.CrossRefGoogle Scholar
Glosten, L. R., and Milgrom, P. R.. “Bid Ask and Transaction Price in a Specialist Market with Heterogeneously Informed Traders.” Journal of Financial Economics, 14 (1985), 71–100.CrossRefGoogle Scholar
McInish, T., and Wood, R. A.. “An Analysis of Intraday Patterns in Bid/Ask Spreads for NYSE Stocks.” Journal of Finance, 47 (1992), 753–764.CrossRefGoogle Scholar
Singh, A. K.; Zaman, M. A.; and Krishnamurti, C.. “Liquidity Changes Associated with Open-Market Repurchases.” Financial Management, 23 (1994), 47–55.CrossRefGoogle Scholar
Stoll, H. R. “The Supply of Dealer Services in Securities Markets.” Journal of Finance, 33 (1978), 1133–1151.CrossRefGoogle Scholar
Stoll, H., and Whaley, R.. “Transactions Costs and the Small Firm Effect.” Journal of Financial Economics, 12 (1983), 57–79.CrossRefGoogle Scholar
Tinic, S. M. E. “The Economics of Liquidity Services.” Quarterly Journal of Economics, 86 (1972), 79–93.CrossRefGoogle Scholar
Tinic, S. M. E., and West, R. R.. “Competition and the Pricing of Dealer Service in the Over-the Counter Stock Market.” Journal of Financial and Quantitative Analysis, 7 (1972), 1701–1727.CrossRefGoogle Scholar
Vermaelen, T. “Common Stock Repurchases and Market Signalling: An Empirical Study.” Journal of Financial Economics, 9 (1981), 139–183.CrossRefGoogle Scholar