Share repurchase tender offers and bid-ask spreads

Hee Joon Ahn, Quanwei Cao, Hyuk Choe

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

This paper examines the impact of share repurchase tender offers on the market microstructure. We find that there is a temporary reduction in the bid-ask spread, and a temporary increase in volume and quotation depth during the offer period. Our evidence suggests that the bid-ask spread is asymmetric during the offer period with the bid-side spread smaller than the ask-side spread. The temporary reduction in the spread around offers is consistent with the competing-market-maker hypothesis which predicts that the intensified competition for the market maker raises bid prices and narrows the spread asymmetrically during the offer period.

Original languageEnglish (US)
Pages (from-to)445-478
Number of pages34
JournalJournal of Banking and Finance
Volume25
Issue number3
DOIs
StatePublished - Mar 1 2001

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Tender offers
Bid/ask spread
Share repurchases
Market makers
Bid
Market microstructure

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

Ahn, Hee Joon ; Cao, Quanwei ; Choe, Hyuk. / Share repurchase tender offers and bid-ask spreads. In: Journal of Banking and Finance. 2001 ; Vol. 25, No. 3. pp. 445-478.
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Share repurchase tender offers and bid-ask spreads. / Ahn, Hee Joon; Cao, Quanwei; Choe, Hyuk.

In: Journal of Banking and Finance, Vol. 25, No. 3, 01.03.2001, p. 445-478.

Research output: Contribution to journalArticle

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