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RFS Advance Access originally published online on August 11, 2003
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Rev Fin 2004; 17:463-498
The Review of Financial Studies Vol. 17, No. 2, pp. 463–498 © 2004 The Society for Financial Studies; all rights reserved.

On the Timing and Execution of Open Market Repurchases

Douglas O. Cook
University of Mississippi

Laurie Krigman
Babson College

J. Chris Leach
University of Colorado and Stockholm Institute for Financial Research

Address correspondence to Laurie Krigman, Babson College, 220-224 Tomasso Hall, Babson Park, MA 02457, or e-mail: laurie.krigman{at}babson.edu.

Little is known about the timing and execution of open market repurchases. U.S. firms are under no obligation to disclose when they are trading, and generally report only quarterly changes in shares outstanding. We use 64 firms' supplementally disclosed repurchase trading data to provide the first examination of repurchase timing and execution. Across the days reported in our sample, firms adopted a variety of execution styles ranging from immediate intense repurchasing to delayed and smoothed repurchasing. We find no clear evidence that repurchases are timed to coincide with, precede, or follow, days on which information is released. We benchmark the costs and value of a given repurchase program against naive accumulation strategies achieving the same terminal portfolio. While there is considerable variation across the firms, NYSE firms on average beat their benchmarks, whereas NASDAQ firms do not. Finally, we document the liquidity impact of open market repurchases. We find that repurchasing contributes to market liquidity by narrowing bid-ask spreads and attenuating the price impact of order imbalances on days when repurchase trades are completed.


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