search query: @author Vermaelen, T. / total: 14
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| Author: | Ikenberry, D. L. Vermaelen, T. |
| Title: | The option to repurchase stock |
| Journal: | Financial Management
1996 : WINTER, VOL. 25:4, p. 9-24 |
| Index terms: | STOCK MARKETS MANAGERS PRICES COMPANIES INVESTMENT |
| Language: | eng |
| Abstract: | Companies often announce their intention to reacquire shares via open market transactions. However, these programs are not firm commitments. By design, they provide managers the flexibility to forego repurchasing stocks. Managers concerned with maximizing the wealth of long-term stockholders will tend to buy back shares when they view their stock as undervalued and otherwise forego repurchasing shares. This inherent flexibility is valued here as an exchange option in which the market price of the stock is exchanged for the value of the stock. In essence, the programs authorize management to use the firm's resources along with their "insider" valuation of the firm to the benefit of long-term shareholders. |
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