The Price Effect of Stock Repurchases: Evidence from Dual Class Firms

Leonce Bargeron () and Michael Farrell ()
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Leonce Bargeron: Gatton College of Business & Economics, University of Kentucky, Lexington, Kentucky 40506
Michael Farrell: Lubar School of Business, University of Wisconsin-Milwaukee, Milwaukee, Wisconsin 53202

Management Science, 2021, vol. 67, issue 10, 6568-6580

Abstract: We examine a sample of dual-class firms to isolate the magnitude and duration of the demand-driven price effect from stock repurchases. In this novel setting, the non-repurchased class serves as a near-perfect counterfactual to the repurchased class and controls for private information about firm value contained in the repurchases. The average repurchase in our sample, 0.30% of outstanding shares within a month, increases the stock price by 40 to 70 basis points relative to the non-repurchased class of stock. The effect dissipates completely over the subsequent month unless extended by continued repurchases. This small, short-lived price effect leaves little scope for CEOs to benefit from value-destroying repurchases motivated by self-interest.

Keywords: repurchases; dual class; price effect; agency (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:10:p:6568-6580

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