Previous studies offer a mixed understanding of the economic role of stock repurchases. This paper investigates three key economic motivations- mispricing, disgorging free cash flow and increasing leverage- by evaluating cross-sectional differences in both the initial market reaction and long-run performance. The initial reaction provides some support for the mispricing story. However, subsequent earnings-related information shocks suggest that the initial market reaction is incomplete and that long-run performance may be informative. The long-horizon return evidence is most consistent with the mispricin
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