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Does Share Buyback Deter Takeovers? From Ex Ante to Ex Post

Billett and Xue (2007) document that the ex ante (pre-repurchase) takeover probability has a positive and significant impact on share repurchases, but there is no evidence that share repurchases are indeed associated with fewer ex post takeover bids. We examine whether share buyback deters takeovers ex post, controlling for the ex ante takeover probability. We find that, buying back shares is indeed effective in deterring the ex post takeover bids among the firms with high ex ante takeover likelihood. Furthermore, firms with higher ex ante takeover likelihood pay a higher average price to buy back shares, which is consistent with firms using share buyback to deter takeovers.