Why Do Reits Repurchase Stock? Extricating the Effect of Managerial Signaling in Open Market Share Repurchase Announcements

24 Pages Posted: 26 Dec 2006

See all articles by James C. Brau

James C. Brau

Brigham Young University

Andrew M. Holmes

Brigham Young University

Abstract

This paper explores the effect of stock repurchase announcements on equity returns for publicly traded real estate investment trusts (REITs). In addition to providing analysis of the corporate decision to repurchase shares, the study of share repurchases in the context of REITs provides a novel opportunity to disentangle the impact of competing theories for the abnormal returns observed around repurchase announcements. Prior literature advances six hypotheses to explain the stock price reaction associated with repurchases. Given that the theories all predict the same stock price reaction, existing studies are unable to disentangle the competing hypotheses. The intent of this research is to extricate the signaling hypothesis from the competing explanations to determine whether the managerial signaling hypothesis is a credible explanation for the abnormal returns observed around share repurchase announcements. After controlling for relevant economic variables, we provide evidence for the efficacy of the managerial signaling hypothesis.

Keywords: REIT, real estate investment trust, abnormal return, repurchase

JEL Classification: R11,R38,P51,P43,O16,M19,L98,L85,L20,G32,D21

Suggested Citation

Brau, James C. and Holmes, Andrew M., Why Do Reits Repurchase Stock? Extricating the Effect of Managerial Signaling in Open Market Share Repurchase Announcements. Journal of Real Estate Research, Vol. 28, No. 1, 2006, Available at SSRN: https://ssrn.com/abstract=953688

James C. Brau (Contact Author)

Brigham Young University ( email )

TNRB 640
Marriott School
Provo, UT 84602
United States
801-318-7919 (Phone)
801-422-0108 (Fax)

HOME PAGE: http://marriottschool.byu.edu/emp/brau/

Andrew M. Holmes

Brigham Young University ( email )

Provo, UT 84602
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
251
Abstract Views
3,431
rank
166,517
PlumX Metrics