An Empirical Examination of the Stated Purposes of Issuer Tender Offers to Purchase Common Stock

摘要

This paper documents the purposes of issuer tender offers to repurchase stock, as stated in Securities and Exchange Commission (SEC) disclosures, over the period 1994-2006. We explore whether stated purposes relate to announcement period returns and find returns are significantly lower when repurchases replace dividends, distribute cash from unspecified sources, or occur subsequent to third-party tender offers. Announcement period returns are significantly higher when repurchases are viewed by management as the best investment opportunity available or when they occur subsequent to previous repurchase programs. Finally, we find evidence in support of signaling theory and Jensen's (1986) agency cost of free cashflow theory.