Determinants of the choice between alternative share repurchase methods

This study provides an empirical examination of the determinants of the choice between alternative share repurchase methods. It is shown that the likelihood of selecting a self-tender offer over an open market share re-purchase increases with the repurchasing firm's agency costs of free cash Jlow, inside ownership percentage, leverage, prebuyback stock perform-ance, and the magnitude of cash involved in the transaction. The empirical evidence is consistent with the free cash Jlow, information-siRnaling, and managerial entrenchment hypotheses contributing toward explaining the choice of repurchase method among firms. The study concludes that the two repurchase methods appear to serve different purposes for the repur-chasing jirm. 1