Abstract
This paper investigates the new and growing practice of accelerated share repurchases (ASRs). In an ASR a firm hires an investment bank to borrow shares from existing investors. The investment bank delivers these shares to the firm, and the firm eliminates the shares immediately. The bank then repurchases shares in the open market over a period of several months and returns them back to the lenders. We document the characteristics and market performance of ASR stock. ASRs are primarily used to accelerate existing open-market repurchase programs. While the announcement return on ASRs is positive, it is very small when compared to other repurchase methods. Interestingly, the post-announcement performance of ASR stock is poor, unlike that documented in the literature for other repurchase methods. Our findings suggest that ASRs do not signal undervaluation, a motivation frequently suggested by analysts and academics for repurchases. The firm is getting the shares today but only will pay tomorrow's price.
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