Stock repurchases and treasury share sales: do they stabilize price and enhance liquidity?

Amedeo De Cesari, Susanne Espenlaub, Arif Khurshed

Research output: Contribution to journalArticlepeer-review

Abstract

Can companies reduce the volatility and increase the liquidity of their stocks by trading them? In the context of the Italian stock market, where companies have far more leeway to sell as well as buy their own stocks than in the U.S., the answer is yes. We examine the effects of trading (open-market share repurchases and treasury shares sales) on liquidity (bid–ask spread) and volatility (return variance). Further, we examine the impact of shareholder approvals of repurchase programs on liquidity and volatility. We find clear evidence that trading increases liquidity and reduces volatility. These results are consistent with our analysis of the motives Italian companies give for making share repurchases.
Original languageEnglish
Pages (from-to)1558–1579
Number of pages22
JournalJournal of Corporate Finance
Volume17
Issue number5
Early online date11 Aug 2011
DOIs
Publication statusPublished - Dec 2011

Keywords

  • repurchase
  • liquidity
  • price stabilization
  • bid-ask spread
  • variance

Fingerprint

Dive into the research topics of 'Stock repurchases and treasury share sales: do they stabilize price and enhance liquidity?'. Together they form a unique fingerprint.

Cite this