Friday, January 21, 2011

SSRN-Do Firms Buy Their Stock at Bargain Prices? Evidence from Actual Stock Repurchase Disclosures by Jacob Oded, Azi Ben-Rephael, Avi Wohl

SSRN-Do Firms Buy Their Stock at Bargain Prices? Evidence from Actual Stock Repurchase Disclosures by Jacob Oded, Azi Ben-Rephael, Avi Wohl: "
We find that smaller S&P 500 firms repurchase less frequently than larger firms, and at a price which is significantly lower than the average market price. Their repurchase activity is followed by a positive and significant abnormal return which lasts up to three months after the repurchase. These findings do not hold for large S&P 500 firms. Our interpretation is that small firms repurchase strategically, whereas the repurchase activity of large firms is more focused on the disbursement of free cash. "


Which would seemingly fit with most stories of analyst coverage and size being determinants in levels of market efficiency.

I have a feeling we have not heard the last word on this one. Stay tuned!

No comments: