This dissertation has three essays. In the first essay, I investigate whether the decision to repurchase stock is driven by investor demand for repurchases. Specifically, I hypothesize that firms cater to investor demand for repurchases by initiating repurchases when investors place premiums on the stock prices of repurchasing firms. I propose proxies (analogous to Baker and Wurgler (2004)) that measure the repurchase premium. I find that the lagged repurchase premium is positively and significantly related to repurchase initiation and continuation decisions, even after controlling for tax effects, year trends and alternate investment opportunities. I find that a greater fraction of dividend paying firms also repurchase stock when the repurchase premium has been high. The fraction of dividend payers that repurchase stock is found to be negatively related to the lagged dividend premium, establishing the competing attractiveness of dividends and repurchases based on the respective dividend and repurchase premium. Firms are more likely to repurchase stock when the repurchase premium is high and the difference between the repurchase and dividend premium is positive. The second essay looks at a relatively new way of buying back shares, called Accelerated Share Repurchases (ASRs). ASRs are credible commitments by firms to repurchase shares immediately. Including an ASR in a repurchase program reduces the flexibility that firms have to alter an announced program in response to subsequent changes in the price and liquidity of its stock, unexpected shocks to cash flow and/or investment, etc. We investigate whether firms decisions to include ASRs in their repurchase programs are associated with factors expected to influence the costs of lost flexibility and the benefits of enhanced credibility and immediacy. The third essay looks at stock market trading characteristics around ASR announcements. I find that the trading costs decrease following an ASR announcement. On average, market quality improves; trading volume increases; and trade size increases following an ASR announcement. The information asymmetry component of spread also increases post ASR.
| Identifer | oai:union.ndltd.org:PITT/oai:PITTETD:etd-07052010-154641 |
| Date | 05 October 2010 |
| Creators | Kulchania, Manoj |
| Contributors | Kenneth M. Lehn, Kuldeep Shastri, Leonce L. Bargeron, Shawn E. Thomas, Chad J. Zutter, Vidhan Goyal |
| Publisher | University of Pittsburgh |
| Source Sets | University of Pittsburgh |
| Language | English |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.library.pitt.edu/ETD/available/etd-07052010-154641/ |
| Rights | restricted, I hereby certify that, if appropriate, I have obtained and attached hereto a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dissertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to University of Pittsburgh or its agents the non-exclusive license to archive and make accessible, under the conditions specified below, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report. |
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