Earnings and risk changes around stock repurchase tender offers

Michael Hertzel, Prem C. Jain

Research output: Contribution to journalArticle

69 Citations (Scopus)

Abstract

This paper provides evidence that repurchase tender offer announcements convey favorable information about the level and riskiness of future earnings. We show that analysts revise their forecasts of earnings per share upward following repurchase announcements. Repurchase announcement stock price reactions are positively correlated with revisions in short-term forecasts, but not correlated with revisions in long-term forecasts. Thus, the information is primarily about transitory changes in earnings. We also provide evidence that equity betas decline after repurchases. Our findings indicate that the equity beta decreases are due to decreases in the underlying riskiness of the firm's assets.

Original languageEnglish (US)
Pages (from-to)253-274
Number of pages22
JournalJournal of Accounting and Economics
Volume14
Issue number3
DOIs
StatePublished - 1991

Fingerprint

Stock repurchases
Tender offers
Repurchase
Announcement
Riskiness
Equity
Earnings per share
Analysts
Stock price reaction
Long-term forecast
Assets

ASJC Scopus subject areas

  • Accounting
  • Economics and Econometrics
  • Finance

Cite this

Earnings and risk changes around stock repurchase tender offers. / Hertzel, Michael; Jain, Prem C.

In: Journal of Accounting and Economics, Vol. 14, No. 3, 1991, p. 253-274.

Research output: Contribution to journalArticle

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