The Role of Media in Share Repurchases

Abstract

I examine the impact that investor attention has on open market share repurchase outcomes. Using a novel and comprehensive archive of Thomson Reuters’ news articles and third-party newswires to proxy for investor attention, I find that high levels of media coverage around share repurchase announcements are negatively related to the fraction of shares firms actually repurchase following the announcements, especially for firms with small ex-ante stock mispricings. The evidence suggests that only firms with large mispricings that fail to attract sufficient investor attention to the announcements have to follow through on their repurchase programs to send undervaluation signals and correct the mispricings. Furthermore, I find that the highest cumulative abnormal returns three, six, and 12 months following the announcements correspond to firms with the lowest media coverage around the announcements. These results provide new evidence that media coverage helps improve market efficiency by increasing investor attention.

Keywords: Investor attention, share repurchases, news analytics

JEL Classification: G14, G35