Voluntary Disclosures Regarding Open Market Repurchase Programs

This paper examines firms' voluntary disclosures regarding open market repurchase programs, i.e., announcements that firms have suspended, resumed, or completed repurchases. Abnormal returns around announcements are, on average, positive when firms voluntarily announce repurchase resumptions or completions with new authorizations but negative when firms announce repurchase suspensions or completions without new authorizations. These findings indicate that these voluntary disclosures contain important value-relevant information and also that investors expect repurchase programs, once initiated, to continue, implying less managerial flexibility in repurchases than previously thought. We find that voluntary disclosures about repurchase programs are also informative about subsequent repurchase activities. Firms that voluntarily disclose repurchase suspensions are significantly more likely to ultimately complete their current repurchase programs and initiate new repurchase programs than firms that could have voluntarily announced suspensions but did not. Consistent with voluntary disclosures of such bad news helping firms to establish reputations for repurchase transparency, firms voluntarily disclosing repurchase suspensions experience larger positive average abnormal returns around subsequent repurchase authorizations. We also exploit a change in mandatory reporting requirements for repurchases to document that voluntary updates are generally more informative when there are fewer mandatory disclosures regarding repurchase activities