Actual Share Repurchases, Price Efficiency, and the Information Content of Stock Prices

We examine the impact of actual share repurchases on stock prices using several measures of price efficiency and manually collected data on U.S. repurchases. We find that share repurchases make prices more efficient and reduce idiosyncratic risk. Further analyses reveal that the effects are primarily driven by repurchases in down markets. We conclude that share repurchases help to maintain accurate stock prices by providing price support at fundamental values. We find no evidence that managers use share repurchases to manipulate stock prices when selling their equity holdings or exercising stock options. Received June 1, 2015; accepted June 1, 2016, by Editor David Denis.