Original Research

Review of Quantitative Finance and Accounting

, Volume 34, Issue 4, pp 517-531

First online:

Managerial motivation and timing of open market share repurchases

  • Zahn BozanicAffiliated withDepartment of Accounting, The Smeal College of Business, The Pennsylvania State University Email author 

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There are two major mechanisms by which managers distribute cash to shareholders: through dividends and share repurchases. Historically, dividends have been the preferred method, but in recent years, share repurchases have become more popular, with more firms using repurchases than dividends to distribute cash. During the sample period of 2004–2006, 6.5 billion shares were repurchased for a total dollar volume amount of $222 billion. Using a unique dataset on actual monthly share repurchases, this paper investigates when and why managers repurchase shares in the open market. The paper finds evidence that firms which make repurchases are jointly timing their repurchases to perceived undervaluation and the presence of discretionary cash flow. In addition, the paper finds evidence which supports that (1) firms in competitive industries tend to repurchase less, (2) firms tend to substitute repurchases for anti-takeover provision adoption, and (3) firms attempt to manage earnings upward through the use of repurchases.


Share repurchases Market timing Anti-takeover provisions Earnings management Herfindahl index

JEL Classification

G34 G35 M41