Using REITs to Extricate the Effect of Managerial Signalling in Open Market Share Repurchase Announcements

This paper explores the effect of stock repurchase announcements on equity returns for publicly traded real estate investment trusts. The study of share repurchases in the context of real estate investment trusts provides a novel opportunity to disentangle the impact of competing theories for the abnormal returns observed around repurchase announcements. Prior literature advances six hypotheses to explain the stock price reaction associated with repurchases. The unique institutional attributes of real estate investment trusts negate the economic logic sustaining all of the hypotheses except the managerial signaling hypothesis. Hence, we are able to focus exclusively on assessing the impact of managerial signaling. After controlling for relevant economic variables, we provide evidence for the efficacy of the managerial signaling hypothesis in the context of open market share repurchases.