The impact of targeted share repurchases on the wealth of non-participating shareholders

This paper examines empirically whether management is acting in the best interests of non‐participating shareholders when it engages in a targeted share repurchase. Over the full purchase‐to‐repurchase period, non‐participating shareholders earn significantly positive abnormal returns, providing additional evidence that shareholders benefit from the initial investment that leads to the share repurchase. On the repurchase date, however, shareholders experience a significant decrease in their wealth position that cannot be attributed solely to a wealth transfer from the non‐participating to the participating shareholders. Consequently, one cannot generalize about management's intentions for a targeted share repurchase.