Testing the real option hypothesis on the declining open-market repurchase announcement returns

Publication Type

Journal Article

Publication Date

9-2020

Abstract

Recent studies report that open-market repurchase announcements have become less attractive to stock investors. This study documents that lower announcement returns are attributed to subsequent repurchase announcements, which have increased in number in recent years. Using the real-option-to-delay framework proposed by Ikenberry, D and T Vermaelen (1996). The option to repurchase stock. Financial Management, 25, 9-24, this study finds evidence consistent with decreasing value of the option to repurchase shares prior to subsequent open-market repurchase announcements. This explains the decreasing market reactions to such announcements

Keywords

Cumulative announcement returns, Open-market share repurchase, Real option

Discipline

Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

Publication

Review of Pacific Basin Financial Markets and Policies

Volume

23

Issue

3

ISSN

0219-0915

Identifier

10.1142/S0219091520500241

Publisher

World Scientific

Embargo Period

5-23-2021

Additional URL

https://doi.org/10.1142/S0219091520500241

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