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forthcoming Journal of Financial and Quantitative Analysis

By Konan Chan, David Ikenberry, Inmoo Lee, Ali Erdem, John Freeman, Michael Habib, Jan Jindra, Jonathan Karpoff (the, Ranga Narayanan and Tim Loughran


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

Year: 2003
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