Also, since our sample is drawn from a later period, we perform this analysis to confirm that our sample's price effects are comparable to those reported in earlier studies of self-tender offers (e.g., Bagwell, 1992, for DA repurchases, and Dann, 1981, for FPTO repurchases).
Panel A of Table IV presents the mean and median quoted depths for the baseline, pre-event, tender, and post-event periods for the combined DA and FPTO sample.
During this specific period, the implicit demand with price limits (DA) or a single price (FPTO) announced by the repurchasing firm provides extra depth to the market and is responsible for the increased liquidity.
Our results confirm that DA and FPTO repurchases lead to a nontransitory stock price increase, and show that short-term liquidity improves during the tender period when the firm's repurchase offer remains outstanding.
We also include an indicator variable to differentiate whether the offer was a DA or an FPTO. This indicator variable is not significant, and so we do not include it in any further analysis.
Variable Mean Median Minimum Maximum Price range (high-low) for DA $3.66 $3.00 $0.45 $40.00 Repurchase premium--high price 13% 13% 0% 51% (for DA) Repurchase premium--low price -2% -3% -17% 33% (for DA) Repurchase premium--using 14% 9% 1% 80% single price for FPTO Final price premium 11% 9% -10% 80% Number of days between ED and AD 35 31 21 139 Number of days between RD and ED 3 1 0 13 Number of shares firm plans to 6.56 2.70 0.10 85.00 repurchase Number of shares repurchased 5.76 2.00 0.00 85.49 Market value of shares repurchased 160.5 37.62 0.00 2,465.5 Proration Factor (n = 71 of the 66% 71% 18% 98% 165 observations) Table III.
During the tender period, the implicit demand (with price limits in the case of DAs, and a single price for FPTOs announced by the repurchasing firm) provides extra depth to the market.
The price increase that we document is consistent with the results in Dann (1981), for DAs and FPTOs by Comment and Jarrell (1991) and specifically for DAs by Bagwell (1992).