Open Market Repurchase Program, Dividend Payment Status, Information Asymmetry, and Institutional Ownership

Abstract

This paper examines the relationship between previous dividend payment policy and the cumulative abnormal return around the OMR program announcement day. The results show that the market reacts more positively to OMR program announcements by non-dividend firms or with no change in dividend payment than to those of dividend paying or changing in dividend payment firms. We also provide evidence that dividend activities mitigate the effect of information asymmetry caused by ownership structure. Finally, after the 2003 tax cut, the market has also reacted less positively to open market repurchase announcements than before 2003.