How do share repurchases affect ownership concentration?

We study how share repurchases affect the ownership stake of outside blockholders in 950 publicly-traded US corporations from 1996 through 2001, using a control function approach to address the possible endogeneity of repurchases. We find that share repurchases tend to make outside ownership less concentrated: repurchasing 1% of outstanding common equity decreases the fraction owned by large shareholders by around one and a half percentage points. This may decrease outside shareholders' influence over firm decision-making. Our results are confirmed when we restrict the sample to institutional owners, but not to individual owners.

► We study how share repurchases affect the ownership stake of outside blockholders. ► Our sample consists of 950 publicly-traded US corporations from 1996 through 2001. ► We find that share repurchases make outside ownership less concentrated. ► It is large institutional investors rather than individuals who sell their shares.