{"title":"The Liquidity Impact of Open Market Share Repurchases","authors":"Jonas Råsbrant, Adri De Ridder","doi":"10.2139/ssrn.493044","DOIUrl":null,"url":null,"abstract":"We examine the market liquidity impact of open market share repurchases in a computerized order driven market. Using a detailed dataset of daily repurchase transactions on the Stockholm Stock Exchange together with intraday data on bid-ask spreads and order depths enable us to examine liquidity effects on the actual repurchase days. Overall, we find that repurchase trades inside the order driven trading system contributes to market liquidity through narrower bid-ask spreads and deeper market depths. After controlling for total trading volume, price, and volatility we still find a significant decrease of the bid-ask spread on repurchase days relative to surrounding non-repurchase days. However, repurchases executed as block trades outside the order driven trading system have a detrimental effect on the bid-ask spread, consistent with a negative response to the presence of informed managerial trading.","PeriodicalId":47599,"journal":{"name":"European Journal of Finance","volume":null,"pages":null},"PeriodicalIF":2.2000,"publicationDate":"2013-02-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"4","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"European Journal of Finance","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.2139/ssrn.493044","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 4
Abstract
We examine the market liquidity impact of open market share repurchases in a computerized order driven market. Using a detailed dataset of daily repurchase transactions on the Stockholm Stock Exchange together with intraday data on bid-ask spreads and order depths enable us to examine liquidity effects on the actual repurchase days. Overall, we find that repurchase trades inside the order driven trading system contributes to market liquidity through narrower bid-ask spreads and deeper market depths. After controlling for total trading volume, price, and volatility we still find a significant decrease of the bid-ask spread on repurchase days relative to surrounding non-repurchase days. However, repurchases executed as block trades outside the order driven trading system have a detrimental effect on the bid-ask spread, consistent with a negative response to the presence of informed managerial trading.
期刊介绍：
The European Journal of Finance publishes a full range of research into theoretical and empirical topics in finance. The emphasis is on issues that reflect European interests and concerns. The journal aims to publish work that is motivated by significant issues in the theory or practice of finance. The journal promotes communication between finance academics and practitioners by providing a vehicle for the publication of research into European issues, stimulating research in finance within Europe, encouraging the international exchange of ideas, theories and the practical application of methodologies and playing a positive role in the development of the infrastructure for finance research.
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