Share repurchases and wealth transfer among shareholders.

摘要

This dissertation consists of two essays that study the trading of institutional and individual shareholders during a share repurchase. Chapter one examines how institutional investors trade during a repurchase, and what motivates their behavior. Chapter two focuses on institutional demand relative to individuals, and assess the relative informational advantage institutions show during a share repurchase.;Consistent with the predictions of Brennan and Thakor's (1990) model of shareholder preferences, chapter one of this dissertation finds that after controlling for liquidity provision and characteristics investing, a one standard deviation increase in share repurchases during a given quarter is associated with a 0.11 standard deviation decrease in institutional investor demand. The results provide further evidence consistent with the hypothesis that firms' insiders use the prior trading of institutional investors as signals of "market" valuations. Specifically, a one standard deviation decrease in net institutional demand during a year is followed by an expected 0.062 standard deviation increase in share repurchases the following quarter. This effect is primarily driven by changes in non-transient institutional investor demand. In chapter two I show that share repurchases offer a unique opportunity for informed shareholders to exploit their less-informed counterparts. When shareholders are defined as either institutions or individuals, I document average wealth transfers to institutions, in the amount of 1%, 1.2%, and 4% of pre-transaction market-cap over the 6, 12, and 60 months following a share repurchase. The results confirm the predictions of shareholder preference theory and suggest that informed shareholders can magnify the effect of their informational advantage during a share repurchase.