Abstract
In this study we examine earnings management around open market share repurchases. We examine two hypotheses: managerial opportunism and market response, both of which predict that
 managers will manage earnings down prior to an open market repurchase. Using 2,939 repurchase announcements during 1980- 1998 we find evidence that managers do manage earnings down before share repurchases. We also find that the market does not identify the earnings manipulation when the repurchase is announced, and that discretionary accruals can explain a significant part of long-term positive returns following repurchases. Altogether the evidence is consistent with the managerial opportunism hypothesis. Further investigation indicates that managers with higher ownership in the firm are more likely to manage earnings down.
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