Equity ownership and firm value: Evidence from targeted stock repurchases

In contrast to the negative average abnormal return associated with the announcement of a control-related targeted repurchase (greenmail transaction), we find that the announcement of a noncontrol-related targeted repurchase is associated with a positive and significant average abnormal return. Cross-sectional analysis indicates that the change in firm value at the announcement of a noncontrol-related targeted repurchase is negatively related to the resulting changes in both insider ownership and outside blockholdings. We also find significant differences in announcement-period stock price effects depending on the identity of the selling shareholder.