The influence of actual share repurchases on price efficiency in the United States

This paper examines the influence of share repurchases in the United States on the efficiency of stock prices for firms listed on the NYSE and NASDAQ. I find that actual share repurchases increase the price efficiency and information content of thestockpriceswhen firms provide price support below or at the intrinsic value during periods with negative market news. Furthermore, I find thatshare repurchases byNYSE-listed firmsincreasethe efficiency of the stock price significantly more than NASDAQ-listedduring down market periods.I attribute this findingto better market timing abilities of NYSE-listed firms and their more extensive adoption of repurchases to provide price support. Moreover, I obtain evidence that firms on the NYSE manipulate stock prices by intentionally increasing stock prices above their intrinsic value during periods containing positive market news.I find that particularly repurchasing firms where corporate insiders have most to gain have a detrimental effect on the efficiency of stock prices. Finally, I provide evidence that analyst EPS forecast-driven repurchases have a harmful impact on the efficiency and the information content of stock prices.