On the relation between Actual Share Repurchases and Investor Attention

This thesis examines the relation between share repurchases and investor attention by using different measures of share repurchase intensity and investor attention for U.S. firms. I find evidence that the relation between repurchase activity and investor attention differs between individual and institutional investor attention. While the relation between individual attention and share repurchases tends to be negative, results oninstitutional attention show a positive relation. For both measures of attention, institutional attention in particular, the results show that firms can improve price efficiency, reduce idiosyncratic risk and increase upward price pressure by performing share repurchases during times of low attention. As institutional attention significantly changes short-sellingof a stock, share repurchases may be used to offsetpotentialdownward pressure on the stock price. I do not find evidence that undervaluation drives the positive relation between institutional attention and share repurchases. Consequently, there mayexistother factors related to institutional behavior explainingthe positive relation between institutional attention and repurchase activity.