Share repurchase tender offers and bid-ask spreads

This paper examines the impact of share repurchase tender offers on the mar ket microstructure. We find that there is a temporary reduction in the bid- ask spread, and a temporary increase in volume and quotation depth during t he offer period, Our evidence suggests that the bid-ask spread is asymmetri c during the offer period with the bid-side spread smaller than the ask-sid e spread, The temporary reduction in the spread around offers is consistent with the competing-market-maker hypothesis which predicts that the intensi fied competition for the market maker raises bid prices and narrows the spr ead asymmetrically during the offer period. (C) 2001 Elsevier Science B.V. All rights reserved. JEL classification: G10; G12; G13.