Skip to main content
Open Access Publications from the University of California

Berkeley Law

Boalt Working Papers in Public Law bannerUC Berkeley

Share Repurchases and Managerial Opportunism


Public companies in the United States and elsewhere are increasingly using open market repurchases, rather than dividends, to distribute cash. This paper explains why managers' ability to use inside information to repurchase stock at a bargain price is likely to systematically transfer value from public investors. In addition, tying cash distributions to the gap between the stock price and its actual value is likely to distort managers' payout, disclosure, and investment decisions, further reducing shareholder returns. The paper also proposes requiring firms to publicly disclose in advance the repurchase orders transmitted to their brokers. Such a disclossure rule, the paper shows, would reduce the economic distortions associated with repurchases without undermining their protential benefits.

Main Content
For improved accessibility of PDF content, download the file to your device.
Current View