Open-market block share repurchases probability, frequency and timing

Abstract

We benefit from the unique disclosure regulations in Taiwan and investigate the influence of firm characteristics on open-market block share repurchases. We find that smaller firms with a higher leverage are more likely to execute block share repurchases reaching the share quantity criterion and tend to do so more frequently than all other firms, supporting the signaling hypothesis. By contrast, larger firms with a lower leverage prefer block share repurchases reaching the share value criterion, supporting the leverage hypothesis. We further examine the magnitude of actual share repurchases in our sensitivity analysis. We find that smaller firms with a higher leverage are positively associated with the number of shares actually repurchased expressed as a percentage of outstanding shares while larger firms with a smaller leverage ratio are positively associated with the value of shares actually repurchased. Moreover, both kinds of firms tend to execute block share repurchases early but firms suffering undervaluation more persevere regardless of the rising costs.