Do managers intentionally use repurchase tender offers to signal private information? Evidence from firm financial reporting behavior |
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Authors: | Henock Louis Hal White |
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Institution: | Smeal College of Business, Pennsylvania State University, University Park, PA 16802, USA |
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Abstract: | Signaling is the most commonly cited explanation for stock repurchases in the academic literature. Yet, there is little evidence on whether managers intentionally use repurchases as signaling devices. Using a firm's financial reporting behavior to infer managerial intent, we find evidence suggesting that managers intentionally use fixed-price repurchase tender offers to signal undervaluation. In contrast, we find no evidence that managers use Dutch-auction tender offers to signal undervaluation. Instead, firms engaging in Dutch-auction repurchases act as if they are trying to deflate their earnings prior to the repurchases to further reduce the repurchasing price. |
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Keywords: | G14 G35 M41 |
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