The Information Content of Repurchase Program Status Updates

Abstract

This paper examines firms’ voluntary disclosures regarding open market repurchase (OMR) programs, i.e., announcements that firms have suspended, resumed, or completed repurchases. Such disclosures are not uncommon but have not been investigated before. Abnormal returns around announcements are, on average, positive when starting or continuing repurchases and negative when stopping repurchases, either by suspending uncompleted programs or by not immediately following completed programs with new programs. Our findings suggest there is less managerial flexibility in repurchases than previously thought. Managers’ decisions to provide status updates relate to materiality, auditor quality, product market competition, and repurchase frequency. Also, when we examine a positive shock to mandatory disclosure, we find that mandatory disclosure substitutes for voluntary disclosure and the effects of auditor quality, strategic considerations and industry peers on voluntary disclosure choice are attenuated.