This study examines whether repurchase announcements released by customers cause suppliers to revise their beliefs about projects’ values and modify subsequent investments decisions. By analyzing a sample of repurchase announcements released by firms between 1995 and 2008, this study found that the suppliers show a negative stock price reaction when a customer announces a stock repurchase. The negative return of the supplier is consistent with the free cash flow hypothesis. Further, this study found that changes in supplier investment during the three years following a repurchase announcement are significantly related to the abnormal return the supplier at the time of the repurchase announcement. These results indicate that repurchase announcements convey information about the investment projects of repurchase announcing firm’s suppliers.

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