FINTECH THRUST SEMINAR | Disclosing Share Repurchase More Frequently?
Disclosing Share Repurchase More Frequently?
Abstract:
In response to the exponential increase in share repurchases, the U.S. Securities and Exchange Commission (SEC) adopted a rule in 2023 to increase the disclosure frequency of share repurchases from quarterly to daily. We demonstrate theoretically and empirically that more frequent disclosure would increase, rather than decrease, the volume of share repurchases. Increased disclosure frequency reduces information asymmetry, thereby lowering the price impact of repurchases and incentivizing firms to buy back larger amounts. However, it also triggers price jumps, raising the total cost of repurchasing despite the reduced marginal cost of additional buybacks. Analyzing a prior regulatory change that increased disclosure frequency from yearly to quarterly, we find that this adjustment led to a 1% increase in repurchase volume relative to total asset value, a 4.5 basis point reduction in price impact, and an 18% increase in repurchase price compared to cross-listed control stocks unaffected by the policy change. Our findings rationalize a” repurchase paradox”: although more frequent disclosure boosts share repurchases, firms oppose such measures, even suing the SEC and eventually overturning the daily disclosure rule.
Mao Ye is an Associate Professor of Finance at Cornell Johnson Graduate School of Management. Before he joined Cornell University in 2022, he was an Associate Professor of Finance at the University of Illinois, Urbana-Champaign. His research specializes in market microstructure, machine learning, and big data, with his work published in leading journals such as the Journal of Finance, Journal of Financial Economics, and the Review of Financial Studies. He is a Research Associate at the National Bureau of Economic Research (NBER), a Faculty Fellow at the National Center for Supercomputing Applications (NCSA), and a Fellow for the Program in the Law and Economics of Capital Markets at Columbia Law School. He was an associate editor of Management Science. Ye delivered the keynote address, "Big Data in Finance," at the NBER Summer Institute in 2018 and returned to give another keynote, "The Next Chapter of Big Data in Finance," at the 2024 NBER Summer Institute.
Mao Ye earned his Ph.D. from Cornell University in 2011. While a student at Cornell, he was elected to the university's Board of Trustees, becoming the first trustee
(校董) from Chinese Mainland at any Ivy League institution. In 2016, he was named Educator of the Year by the University of Illinois at Urbana-Champaign. In 2019, Ye served as the commencement speaker at Renmin University of China.