REPURCHASE TENDER OFFERS AND EARNINGS INFORMATION

Announcements of stock repurchase tender offers are examined as a source of information about firms' future earnings prospects and market risk levels. We document positive earnings surprises and equity systematic risk reduction following tender offers. Announcement stock price reactions are positively correlated with earnings surprises over the concurrent and subsequent two years, and negatively correlated with changes in equity market risk. Finally, stock price reactions to quarterly earnings announcements are more strongly correlated with time-series based earnings surprises in the year prior to the tender offer than during the subsequent year, consistent with tender offer announcements conveying earnings information. © 1991.