Repurchases Have Changed

Using recent U.S. data we find that the patterns of returns around open-market share repurchases have changed compared to existing results based on earlier samples. The long-horizon abnormal returns estimated using various methodologies following repurchase announcements made after 2001 are much smaller than those following earlier announcements, and we find evidence of poorer performance by firms that repeatedly buy back shares. Other returns also differ: the mean abnormal return in the year prior to the repurchase announcement is only –6.0% for recent repurchases, in contrast to –13.3% for earlier repurchases, and the abnormal returns in the five-day window surrounding the announcement are also significantly smaller during the recent period. We also find limited evidence of the risk changes documented using earlier data. We explore possible explanations for these changes in returns around repurchase announcements by examining differences in the characteristics of repurchasing firms in the different subsamples.