Testing the real option hypothesis on the declining open-market repurchase announcement returns
Publication Type
Book Chapter
Publication Date
5-2025
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 and Vermaelen (1996), this study finds evidence consistent with decreasing value of the option to repurchase prior to subsequent open-market repurchase announcements. This explains the decreasing market reactions to such announcements.
Keywords
Open-market share repurchase, Real option, Cumulative announcement returns
Discipline
Finance and Financial Management
Research Areas
Finance
Publication
Handbook of Financial Econometrics, Statistics, Technology, and Risk Management
Editor
LEE, Cheng-Few; LEE, Alice C.; LEE, John C.
First Page
4501
Last Page
4515
ISBN
9789819809943
Identifier
10.1142/9789819809950_0139
Publisher
World Scientific Publishing Europe
City or Country
London
Citation
DING, David K.; KOERNIADI, Hardjo; and KRISHNAMURTI, Chandrasekhar.
Testing the real option hypothesis on the declining open-market repurchase announcement returns. (2025). Handbook of Financial Econometrics, Statistics, Technology, and Risk Management. 4501-4515.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7710
Additional URL
https://doi.org/10.1142/9789819809950_0139