Journal articles on the topic 'On-market share repurchases'
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1
Wesson, N., C. Muller, and M. Ward. "Market reaction to tender and private offers on the JSE." South African Journal of Business Management 48, no. 4 (December 31, 2017): 1–11. http://dx.doi.org/10.4102/sajbm.v48i4.38.
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Investors can benefit when incorporating the information-signalling effect of share repurchases in their investment strategies. Previous South African studies on open market share repurchases confirmed the globally observed signalling-effect, but found open market share repurchases not to be the outright favoured share repurchase type in this country – as is the case globally. The present study is the first to examine the market reaction to the preferred share repurchase type, namely specific (or tender and private offers) share repurchases, in the South African regulatory environment. Abnormal returns were calculated using a 12-parameter benchmark over a four-year event window, for share repurchases announced from 1999 to 2009. Pro rata tender offers were found not to possess information-signalling benefits, but significant excess returns subsequent to the announcement date were reported for the two private offer types (namely other specific offers and the repurchase by the holding company of shares held by subsidiaries). The other specific offers were found to possess significant information-signalling benefits – especially over the long term and in respect of value companies.
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Reddy Yarram, Subba. "Factors influencing on-market share repurchase decisions in Australia." Studies in Economics and Finance 31, no. 3 (July 29, 2014): 255–71. http://dx.doi.org/10.1108/sef-02-2013-0021.
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Purpose – The purpose of this study is to examine factors influencing decisions to repurchase shares on-market in Australia. The present study also examines the role of board size, board independence and chief executive officer duality on the decision to repurchase shares on-market by Australian firms. Design/methodology/approach – This study blends the traditional motivations of share repurchases with the influences of governance. The sample consists of all non-financial firms included in the Australian All Ordinaries Index (AOI) for the period 2004-2010. The repurchase sample consists of 104 repurchases undertaken by 62 firms. A probit panel model is used to analyse the decision to repurchase shares on the market. To account for unobserved heterogeneity, random effects panel models are also used. Findings – Analyses of a sample of non-financial firms included in the AOI for the period 2004-2010 show that size is significantly positively correlated with the decision to repurchase shares, thus supporting the agency cost. Findings also support the undervaluation and signalling hypotheses. Similarly, there is evidence in support of the view that firms repurchase shares to reach their target optimal capital structure. The present study also finds a significant positive association between board independence and the decision to repurchase shares in Australia. Research limitations/implications – On-market share repurchases help firms to signal their future growth opportunities and resolve agency conflicts. Signals from repurchases also help markets discover the true fundamental values of firms. Governance plays an important role in improving the effectiveness of on-market share repurchases, as independent directors provide both monitoring and discipline which helps to ensure that firms have valid motivations in undertaking share repurchases. Practical implications – These findings have implications for capital restructuring and governance policies. Principle-based governance frameworks that prevail in countries like Australia work as well as rule-based governance. Originality/value – This study highlights the complementary roles that financial policies and corporate boards play in corporate governance. Independent boards ensure that firms pursue appropriate financial policies that help resolve agency conflicts and information asymmetry problems.
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Wrońska-Bukalska, Elżbieta, and Bogna Kaźmierska-Jóźwiak. "Signaling hypotheses of share repurchase – life cycle approach. The case of Polish listed companies." Equilibrium 12, no. 2 (June 30, 2017): 245. http://dx.doi.org/10.24136/eq.v12i2.13.
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Research background: Payout policy has attracted a great deal of research, how-ever it still has not been satisfactorily explained why corporations repurchase their shares. The most popular explanation for share repurchases is their signaling power. An alternative explanation for share repurchases is related to free cash flow. We assume that both theories are not competitive, due to the fact that the motives for share repurchases may differ depending on the firm’s life cycle stage.Purpose of the article: The aim of the paper is to test the hypotheses that companies in growth stage are more prone to repurchase their shares due to the their undervaluation.Methods: Our analysis focuses on 116 repurchase on WSE and 47 repurchase on NewCon-nect in Poland during the period 2004–2016 to test the hypothesis. We assume that companies listed on WSE are in their mature stage while listed on NewConnect are in the growth stage. We use market value to book the value ratio (M/BV) and the relation of M/BV ratio for the repurchasing company to the M/BV ratio for the whole market at the date of implementing share repurchase program as a proxies for firm valuation.Findings & Value added: Our study does not confirm that repurchased companies at a growth stage are more undervalued than repurchased companies at a mature stage (at statistically significant level), however there are more repurchased companies at a growth stage with lower M/BV value than repurchase companies in mature stage. Adding corporate life cycle theory into the study, our result can contribute to the literature by more distinctly understanding the motivation of share repurchases. The results might be helpful for companies to determine their financial policies and for investors to determine their investment decisions.
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Lee, Bong Soo, and Nathan Mauck. "Informed Repurchases, Information Asymmetry and the Market Response to Open Market Share Repurchases." Review of Pacific Basin Financial Markets and Policies 21, no. 03 (September 2018): 1850021. http://dx.doi.org/10.1142/s0219091518500212.
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This paper relates informed repurchases to firm information asymmetry. We propose a new measure of informed repurchases, which is based on causality tests relating repurchase information to firm returns. Our results indicate that informed repurchases show larger abnormal returns surrounding the announcement of an open market share repurchase, which suggests the market at least partially recognizes informed repurchases. This holds after controlling for conventional information asymmetry proxies, such as firm size, number of analysts following, and analyst forecast dispersion, indicating that the market is aware of repurchase specific information not captured by traditional information asymmetry proxies. Informed repurchases demonstrate larger long-term abnormal returns at one, two, and three-year windows than high traditional information asymmetry repurchases.
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Kim, Woojin, and Jieun Im. "Effect of Treasury Shares on Firm Value: Evidence from Korea." Korean Journal of Financial Studies 51, no. 6 (December 31, 2022): 787–819. http://dx.doi.org/10.26845/kjfs.2022.12.51.6.787.
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This study examines how treasury shares held by Korea’s publicly traded firms may affect firm value. Unlike in the U.S., where repurchased shares are immediately subtracted from market capitalization, and thus, constitute a genuine payout mechanism, Korean stock market practice retains the value of repurchased shares in market capitalization, effectively treating treasury shares as a form of an asset. Korean investors do not consider share repurchase as a payout mechanism until the repurchased shares are formally cancelled. We find that share repurchases are followed by positive market reactions, which is consistent with the results of previous research, but the reactions are even larger on the cancellation disclosure date. More importantly, firms with larger treasury shares in stock exhibit a 24% lower Tobin’s q compared to those firms with smaller treasury shares. These findings suggest that the market anticipates that treasury shares may be used as a potential antitakeover measure at a later date, which is reflected in the current market value.
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Chen, Hung-Kun, Yan-Shing Chen, Chia-Wei Huang, and Yanzhi Wang. "Managerial Responses to Initial Market Reactions on Share Repurchases." Review of Pacific Basin Financial Markets and Policies 12, no. 03 (September 2009): 455–74. http://dx.doi.org/10.1142/s0219091509001708.
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While most papers in finance literature investigate how the stock market reacts to announcements of corporate events, very few study the opposite, how namely, the manager responds to the information from outside investors. In this paper, we examine this issue, using open market share repurchases. Open market share repurchase offers flexibility for the manager to decide whether or not to buy back shares. Therefore, the manager may refer to the opinions of outside investors and make the decision, based on actual buyback activities. We propose learning, over-confidence and timing hypotheses to interpret the behavior of the managerial response to initial market reaction on the share repurchase announcement. Empirically, if a repurchase announcement abnormal return is low, then the manager tends to achieve the repurchase announced ratio by purchasing more shares. In addition, the investor will positively react to this repurchase in the long run. These empirical findings are consistent with the market timing hypothesis, which implies that managers know the true value of their firms better than the market at the moment of the share repurchase announcement.
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Di, Hui, and Dalia Marciukaityte. "Earnings smoothing around open-market share repurchases." Review of Accounting and Finance 14, no. 1 (February 9, 2015): 64–80. http://dx.doi.org/10.1108/raf-10-2012-0111.
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Purpose – The purpose of this paper is to examine whether firms engage in earnings decreasing management before share repurchases to mislead investors or to smooth earnings and improve earnings informativeness. Design/methodology/approach – The authors examine discretionary accruals and cash flows around open-market share repurchases. The primary discretionary accruals measure is industry- and performance-adjusted discretionary current accruals estimated from cash-flow data. Findings – Results show that, firms experience temporary increases in operating cash flows and use negative discretionary accruals to smooth earnings before share repurchases. Firms with the highest pre-repurchase cash flows use the lowest pre-repurchase discretionary accruals. Moreover, pre-repurchase discretionary accruals reflect expectations about future operating cash flows. Firms with the strongest deterioration in operating cash flows after repurchases use the lowest pre-repurchase discretionary accruals. These findings suggest that repurchasing firms use earnings management to increase smoothness and predictability of reported earnings rather than to mislead investors. Originality/value – This paper provides an alternative explanation to the finding of negative discretionary accruals before share repurchases. It adds to the literature on repurchases and earnings smoothing by showing that firms use earnings management around share repurchases to smooth earnings.
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Van Dalsem, Shane Anthony. "Does founding family involvement affect share repurchase activity? Evidence from US firms from 2006 through 2015." Managerial Finance 45, no. 8 (August 12, 2019): 1146–63. http://dx.doi.org/10.1108/mf-06-2018-0266.
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Purpose The purpose of this paper is to investigate whether family firms (FFs) differ from non-family firms (NFFs) in their propensity and likelihood of repurchasing shares. It focuses on the effects of voting control and managerial control of family members and economic conditions on repurchasing activity. Design/methodology/approach This paper employs pooled Tobit and probit models for a sample of 982 US firms for the period 2006 through 2015 and separates the roles of voting control and managerial control on influencing share repurchase decisions. Findings This paper provides evidence that FFs have a decreased propensity to repurchase shares relative to NFFs over the sample period. In general, the decreased propensity to repurchase shares is driven by the decision whether to repurchase shares and not the percentage of outstanding market value of equity repurchased. Practical implications For critics of share repurchases, this paper provides support for existing literature that FFs provide good long-term stewardship to their firms. In general, it demonstrates that FFs are less likely to repurchase shares than NFFs. Investors that have a preference for or against repurchases can use this information to improve their security selection process. Originality/value To date, the effects of family voting and managerial control on share repurchases in the USA has not been considered in the finance literature. This paper adds to the literature by providing evidence that family influence generally results in a lower propensity to repurchase shares.
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Chee, Chong-Meng, and Nazrul Hisyam Bin Ab Razak. "Effect of Stock Price Information on Timing of Share Repurchases." Journal of Finance and Banking Review Vol. 4 (1) Jan-Mar 2019 4, no. 1 (March 19, 2019): 36–46. http://dx.doi.org/10.35609/jfbr.2019.4.1(5).
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Objective - This study investigates whether private information newly incorporated into stock price enhances performance in timing share repurchases. Methodology/Technique - Cost saving gained in share repurchases is used a proxy for performance of market-timing in share repurchases and firm-specific stock return variation is used to gauge stock price informativeness. A sample of 334 U.S. repurchasing firms are tested using panel data regression. Findings - The paper concludes that managers possess better market timing skill by obtaining more cost saving from their share repurchases when private information is reflected in stock price. Stock price informativeness may be the tool for managers to improve their market timing skill to take advantage of the stock market. Furthermore, firms with smaller size and a higher market-to-book ratios, and firms with higher cash-to-assets ratios are found to achieve more cost saving in buying back their shares indicating that these firms are able to time the market in share repurchasing. Novelty – Despite numerous previous studies focusing solely on using share repurchases announcement for computing cumulative abnormal returns in testing managerial market timing, this study contributes to the literature in several ways: (i) providing evidence relating stock price informativeness and performance of market-timing in share repurchases; (ii) developing a better timing measure constructed using actual repurchasing data; (iii) adopting a cost saving measure as the timing measure instead of cumulative abnormal return. Type of Paper - Empirical. Keywords: Managerial Learning Hypothesis; Market Timing; Stock Repurchase; Stock Price Informativeness; Firm-specific Stock Return Variation. JEL Classification: G12, G13, G14. DOI: https://doi.org/10.35609/jfbr.2019.4.1(5)
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Rozycki, John, and Inchul Suh. "Share repurchases: analyzing short-term and long-term wealth effects." Managerial Finance 45, no. 3 (March 11, 2019): 430–44. http://dx.doi.org/10.1108/mf-06-2018-0258.
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PurposeThe purpose of this paper is to examine the short-term and long-term wealth effects of two share repurchase motivations.Design/methodology/approachThe authors use a multi-period numerical model and a Monte Carlo simulation. The Monte Carlo simulation introduces uncertainty into firms’ market values and eliminates some restrictions used in the numerical model.FindingsIn the long term, firms that refrain from repurchasing overvalued shares outperform otherwise identical firms that do not exhibit such restraint. In the short term, firms that repurchase overvalued shares can outperform firms that refrain from such repurchases. Total returns are a function of misvaluation, the firm’s repurchase decision, the rate of return on invested cash and how long the shares remain misvalued. Share price volatility can influence share repurchase decisions.Research limitations/implicationsThe models are incapable of fully modeling the complexities of a dynamic economic environment.Practical implicationsManagers and investors need to be aware of the short-term and long-term effects of share repurchases. Additionally, investors can gain insight into a firm’s share repurchase motivation by observing its cash balances over time.Social implicationsShare repurchases are a zero-sum game with potentially different short-term and long-term wealth effects.Originality/valueWhen studying the wealth effects of share repurchases, it is important to consider the motivations for repurchasing shares as well as the short-term and long-term effects.
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De Ridder, Adri, and Jonas Råsbrant. "Share repurchases: does frequency matter?" Studies in Economics and Finance 31, no. 1 (February 25, 2014): 88–105. http://dx.doi.org/10.1108/sef-01-2013-0010.
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Purpose – The purpose of this paper is to examine differences in market performance of Swedish firms that initiate repurchase programs infrequently (1-2 programs), occasionally (3-4 programs) and frequently (5 or more programs) over the sample period and examine the relationship between abnormal return and repurchase size in repurchase months. Design/methodology/approach – Standard event study methodology is used to detect abnormal return surrounding initiation announcements of repurchase programs. Ibbotson's RATS-methodology and the calendar-time portfolio methodology are used to estimate long-term abnormal performance. Findings – The authors find differences in market performance of firms that initiate repurchase programs infrequently, occasionally and frequently. As with Jagannathan and Stephens, the authors find that infrequent repurchase programs are greeted with a stronger positive reaction than occasional and frequent programs. However, over long term, infrequent repurchase programs show no abnormal return, while occasional and frequent repurchase programs show a significant positive abnormal return. A positive relationship between abnormal return and repurchase size in repurchase months is documented on average for all types of repurchase programs. Originality/value – By using the detailed data on repurchase activities, the authors are able to examine share repurchases with high precision and relate the performance to repurchase size. Since the duration of a repurchase program is pre-determined in Sweden, the authors are able to classify the programs by frequency and study market performance within the programs.
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Högholm, Kenneth, and Victor Högholm. "Open Market Repurchase Programs - Evidence from Finland." International Journal of Economics and Finance 9, no. 12 (November 2, 2017): 13. http://dx.doi.org/10.5539/ijef.v9n12p13.
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Share repurchase programs have during the past few decades become an important way of distributing cash to shareholders since they are viewed by managers as more flexible than dividends. Open market repurchase authorizations effectively also give managers an option to repurchase shares when they view their stock as undervalued. This study exploits a data set of open market repurchases programs initiated by Finnish stock market listed companies. Finland is unique with regard to the disclosure requirements of open market repurchase programs, which enables an examination of the information content in both the initiation announcement as well as in the announcement of actual repurchases. The study covers all 293 share repurchase programs initiated between 1998 and 2013. The results show a significant positive announcement effect of about 2 percent on the initiation day. The CAAR over a five day event window is also about 1.5 percent (statistically significant). Furthermore, an additional statistically positive effect of 1.5 percent is found on the first repurchase day (about 1.1 percent over a five day event window). The positive announcement effect is larger for announcements regarding initiations of the first or the second repurchase program for a company.
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Phuong, Ngo Mai, and Le Thi Mai Cham. "Factors Impact on Stocks Repurchase of Enterprises Listed on the Stock Market of Vietnam Period of 2015-2019." International Journal of Economics, Business and Management Research 06, no. 05 (2022): 44–49. http://dx.doi.org/10.51505/ijebmr.2022.6504.
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The report assessed the stock repurchase activities of companies listed on the Vietnamese stock market in 2015 - 2019. The article uses Tobit's regression model and FEM - Fixed Effect Model regression model. To determine the motivation of the business to buy back, build a model based on the existing models to evaluate the impact of the share buyback on the enterprise's business performance. The research results show that the sharing repurchase by enterprises lowers valuation or reduces the cost of free cash flow and capital structure of the enterprise. It will determine the repurchase of shares of that enterprise; Along with that, the company's stock repurchase will pay fewer dividends. With the impact of stock repurchases on the enterprise's business performance, the results show that stock repurchases have potential implications for future earnings and the profitability ratios on the business books.
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DE RIDDER, ADRI. "SHARE REPURCHASES AND FIRM BEHAVIOR." International Journal of Theoretical and Applied Finance 12, no. 05 (August 2009): 605–31. http://dx.doi.org/10.1142/s0219024909005427.
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Share repurchases have become an increasingly popular method for companies to distribute cash to its shareholders as many countries have removed restrictions related to this activity. By using a new and unique data set with complete information of each repurchase program, the long-run share price performance following actual share repurchases and whether managers trade strategically are examined for a sample of Swedish firms. I find that the announcement effect surrounding the first repurchase date is small but that repurchasing firms on average outperform several benchmarks during the first three years and thereby exhibit superior information of the stock price. Evidence of strategic trading is documented in small market cap firms. Finally, I document that Swedish firms repurchase more in the first half compared to the second half of the program and also that a higher completion rate is associated with high abnormal return.
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Zhang, Ganggang, and Richard Fairchild. "Investor protection, share repurchases, irrationality and agency conflicts: The implications for corporate governance." Corporate Ownership and Control 4, no. 1 (2006): 248–57. http://dx.doi.org/10.22495/cocv4i1c2p1.
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This paper provides a theoretical analysis of the effects of the strength of investor rights on a firm’s share repurchase policy in the face of agency conflicts and behavioural biases. We consider three reasons for firms to repurchase their shares; to eliminate agency costs of free cash-flow, to time the market, and to cater to investors. In the first case, we demonstrate that investor rights and repurchases may be complements or substitutes in addressing free cash flow problems. In the second case, we argue that stronger investor rights increase informational disclosure which reduces the ability to time the market using repurchases. In the final case, we argue that stronger investor rights may reduce value reducing repurchase catering. We consider the corporate governance implications of our analysis, and discuss the effects of behavioural factors, such as bounded rationality, overconfidence, and regret, on the efficacy of governance systems to deal with the problems relating to repurchases
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Roncagliolo, Elisa. "Managerial discretion in authorising open market share repurchases: empirical evidence from the Italian context." FINANCIAL REPORTING, no. 2 (April 2016): 95–116. http://dx.doi.org/10.3280/fr2015-002004.
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This paper contributes to existing literature on open market share repurchases in Italy by studying authorisations that the board of directors needs to obtain from the shareholders' general meeting in order to acquire company's own shares. In such a context, I investigate whether the buyback purpose that managers disclose in their report affects number of shares to be repurchased. Particularly, since managers could potentially benefit from share repurchase programmes carried out in the presence of stock option plans, I explore whether this motivation influences the number of shares they require to include in the buyback programme. In pursuit of my objectives, I analyse reports managers provide shareholders' meeting to obtain the authorisation to acquire company's own shares over a 6-year period (2004-2009) in Italian listed companies. Main results suggest that the buyback motivation affects number of shares managers intend repurchasing, highlighting the role of the quality of the board of directors in this issue.
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Bester, P. G., W. D. Hamman, L. M. Brummer, N. Wesson, and B. W. Steyn-Bruwer. "Share repurchases: Which number of shares should be used by JSE-listed companies when publishing market capitalisation in annual reports?" South African Journal of Business Management 39, no. 4 (December 31, 2008): 51–61. http://dx.doi.org/10.4102/sajbm.v39i4.571.
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The legalisation of share repurchases in South Africa since July 1999 introduced additional complexity to financial reporting. The repurchasing of shares by subsidiaries or share trusts has led to a new concept: the number of company shares differs from the number of group shares. Ratios like earnings per share and headline earnings per share are governed by accounting standards and circulars, and prescribe the use of the (weighted) number of group shares. No guidance exists on the calculation of market capitalisation.This article aims to determine the methods used by companies listed on the JSE Securities Exchange South Africa (JSE) to calculate their number of shares when publishing market capitalisation. It was found that only about 25% of companies participating in share repurchases and publishing market capitalisation in their annual reports calculated market capitalisation based on the number of group shares. About 75% of the companies did not calculate their market capitalisation based on the number of group shares (i.e. they omitted to deduct subsidiary repurchases and/or trust consolidations in their calculation of the number of shares). It was also found that the JSE, when compiling the Top 40 index, calculates market capitalisation based on the number of company shares (i.e. ignoring subsidiary repurchases and trust consolidations). Accounting guidance is needed on the reporting of market capitalisation to ensure that this aspect is not overstated by the reporting entities.
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Walkup, Brian. "The impact of uncertainty on payout policy." Managerial Finance 42, no. 11 (November 14, 2016): 1054–72. http://dx.doi.org/10.1108/mf-09-2015-0237.
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Purpose The purpose of this paper is to investigate the impact of market-level uncertainty on dividend and repurchase decisions. Design/methodology/approach Using a large data set over a nearly 50-year period, the author examines the choice to pay dividends and repurchase shares using logit and multinomial logit regressions. Findings Market-level uncertainty (measured by a GARCH estimate of volatility, as well as the Chicago Board Options Exchange Volatility Index) is shown to have a statistically significant impact on firms’ payout policy decisions. This impact is different for dividends and repurchases as well as for firms with differing levels of cash flows. As market uncertainty increases, firms with low cash flow levels tighten dividend policy to conserve cash while firms with high cash flow levels become opportunistic through the use of share repurchases. Practical implications The findings allow investors to better understand the connection between shifts in market-level uncertainty and corporate payout policy, specifically through the differing use of dividends and repurchases. Originality/value While prior literature on payout policy has focused on firm-level determinants, this study demonstrates that market-level uncertainty impacts firms’ payout policy decisions uniquely. Furthermore, this is, to the author’s knowledge, the first study to differentiate by relative cash flow level, demonstrating that not all cash flow levels react in the same manner.
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Wesson, N., C. Muller, and M. Ward. "Market underreaction to open market share repurchases on the JSE." South African Journal of Business Management 45, no. 4 (December 31, 2014): 59–69. http://dx.doi.org/10.4102/sajbm.v45i4.141.
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This study examined the long-term performance of open market share repurchase announcements made by companies listed on the JSE during their reporting periods including 1 July 1999 to 2009. A total of 195 open market share repurchase announcements were identified. A maximum outperformance of about 35% was found on day t+550 (about two years subsequent to the announcement). After splitting the sample into 'value' (low P/E ratio) and 'growth' shares (high P/E ratio), it was found that the outperformance was almost entirely confined to the value portfolio, reaching a maximum of about 80% by day t+630 (about two-and-a-halfyears subsequent to the announcement). This study applied a more robust research methodology than used in earlier South African research on this topic; it also used an improveddataset and extended the research period, compared to other research. The results of this study showed much higher positive abnormal returns than were found in earlier international and South African studies. Investors should takeadvantage of the informational value of open market repurchase announcements and the related significant abnormal returns to be earned.
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Cao, Kien, Thuy Nguyen, Hong Nguyen, and Hien Bui. "Incomplete Share Repurchase Programs in Vietnam: Completion Rates and Short-Term Returns." International Journal of Financial Studies 8, no. 3 (September 16, 2020): 57. http://dx.doi.org/10.3390/ijfs8030057.
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Stock repurchases have become a preferred method of distributing cash to stockholders. However, given the high level of information asymmetry and weak corporate governance as well as poor investor protection in Vietnam, many Vietnamese firms use stock repurchases as a tool to manipulate stock prices in the market. Using event study methodology and Tobit regression models, this study examines the stock price behaviors surrounding the event dates and the impact of earnings management activities prior to the stock repurchases on the completion of repurchase announcements in Vietnam. The results show that earnings management practices prior to stock repurchase programs, the percentage of intended buyback shares, and CEO characteristics have a significant impact on the completion of these repurchase programs. Moreover, most of the windows surrounding the event dates do not have any significant abnormal movement of the stock prices. A plausible explanation is that, due to weak corporate governance and poor investor protection, Vietnamese firms send lots of misleading signals through various corporate activities, especially stock repurchase programs. Thus, these signals have less meaning to investors.
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Chen, Anthony, and Hung-Yuan (Richard) Lu. "Deception by commission or by omission – management forecasts surrounding share repurchases." Asian Review of Accounting 28, no. 4 (August 1, 2020): 517–44. http://dx.doi.org/10.1108/ara-08-2019-0149.
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PurposeIn this study, the authors extend upon Brockman et al. (2008), who provide evidence that managers opportunistically accelerate bad news prior to share repurchases, but provide limited evidence that managers withhold good news until after repurchases. The authors examine management forecasts surrounding share repurchases in periods when companies must disclose detailed repurchase information. The authors argue these disclosures increase managers' legal and reputation risks of accelerating bad news, but have a lesser effect on delaying good news.Design/methodology/approachFirst, the authors examine whether managers alter the information released to the market before buying back shares by comparing managerial forecasts made within 30 days before the beginning of a repurchasing period with those made outside of this window. Second, the authors examine whether managers are more likely to provide good news forecasts, in terms of both magnitude and frequency, after buying back shares. Lastly, the authors examine the impact of CEO stock ownership on managerial forecasting behavior surrounding share buybacks.FindingsConsistent with the authors’ hypotheses and contrary to Brockman et al. (2008), the authors find limited evidence that the likelihood or magnitude of bad news forecasts is greater in the period before share buybacks. Instead, the authors document that the frequency and magnitude of good news forecasts increase in periods following share buybacks and that these associations are positively moderated by managerial equity incentives. The authors also find that the withholding of good news is associated with lower average repurchase prices and greater repurchase volume. The authors further show that, when litigation risk is greater, managers are less likely to accelerate bad news prior to repurchases and more likely to withhold good news until after. Overall, the study results are consistent with managers balancing the benefits of opportunistic repurchase behavior with the costs.Originality/valueThis study contributes to the management forecast and share repurchase literatures by providing evidence consistent with managers opportunistically releasing earnings forecasts in the period after buying back shares. Most importantly, the authors show that after the rule revision, managers refrain from actively disclosing bad news that carry higher legal costs. Instead, they opt for the omission of good news to repurchase stocks at lower prices. The study results reconcile the conflicting evidence of Brockman et al. (2008) and Ge and Lennox (2011).
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Bonaimé, Alice Adams. "Mandatory Disclosure and Firm Behavior: Evidence from Share Repurchases." Accounting Review 90, no. 4 (January 1, 2015): 1333–62. http://dx.doi.org/10.2308/accr-51027.
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ABSTRACT This paper examines changes in corporate behavior around the 2003 modification to SEC Rule 10b-18, which mandates enhanced disclosure of repurchase transactions. Firms announce significantly fewer and slightly smaller open market repurchase plans in the enhanced disclosure environment. However, completion rates (the amount of stock repurchased as a percentage of the announced amount) significantly increase. More conservative announcement strategies and more aggressive completion rates are consistent with a decline in false signaling. Indeed, open market repurchase announcements are viewed as more credible, on average, in the enhanced disclosure environment; after controlling for firm characteristics, cumulative abnormal announcement returns are significantly greater in the high disclosure period. As with any analysis based on a regulatory change affecting all firms simultaneously, other unobservable, macroeconomic trends could have affected repurchase behavior. Nonetheless, these results are consistent with significant changes in corporate behavior around new mandatory disclosures. JEL Classifications: G14; G30; G35; G38; M48; K22
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Bonini, Stefano, Vincenzo Capizzi, Maurizio Lombardi, and Roberto Mazzei. "Testing share repurchases hypotheses: a conditional study." Corporate Ownership and Control 5, no. 4 (2008): 420–31. http://dx.doi.org/10.22495/cocv5i4c4p1.
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In the past 20 years share buybacks have experienced a tremendous growth. Yet, we still don’t have a clear understanding of this phenomenon, also because of limited samples available on these corporate decisions. This paper aims at testing the main hypotheses on buybacks drivers and effects by analyzing the impact of share repurchase announcements on the performance of companies listed on the Italian Stock Exchange, conditional and unconditional on the 1998 introduction of the Capital Market Reform. Our findings show that, by imposing more stringent rules on transparency and equal treatment of shareholders in buybacks operations, the change in regulation has increased the volume and frequency of share repurchases announcements. Analogously, the number of repurchasing companies has soared as well. Finally, market reaction to buybacks, as measured by abnormal returns and cumulative abnormal returns has consistently reversed switching from negative to positive long term CARs
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Billett, Matthew T., and Miaomiao Yu. "Asymmetric Information, Financial Reporting, and Open-Market Share Repurchases." Journal of Financial and Quantitative Analysis 51, no. 4 (August 2016): 1165–92. http://dx.doi.org/10.1017/s0022109016000612.
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We explore the link between open-market share repurchases (OMRs) and asymmetric information based on financial reporting quality and find thatopaquefirms experience positive abnormal returns of twice the magnitude of those oftransparentfirms. These significant differences remain after controlling for governance, earnings management, and firm characteristics. We document significantly positive long-run postannouncement returns for opaque firms, but not for transparent firms. We find that takeover activity and premiums rise with repurchase activity by opaque firms, which may explain some of the wealth effects. Our results suggest that asymmetric information plays an important role in the wealth effects around OMRs.
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Tan, Christine E. L., and Susan M. Young. "Share Repurchase Choice and Executive Pension Compensation." Journal of Management Accounting Research 28, no. 1 (September 1, 2015): 127–49. http://dx.doi.org/10.2308/jmar-51280.
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ABSTRACT Shareholders and regulators have increasingly been calling upon firms to reign in executive compensation. Most of this discussion has focused on bonuses and stock options, the more observable portions of an executive compensation package. More difficult for investors to assess, however, is long-term incentive pay, such as supplemental executive retirement plans (SERPs), which has become a significant portion of executive compensation. Our study examines whether managers use accelerated share repurchases (ASRs) to increase total compensation through this under-emphasized form of pay. Managers wishing to increase their total compensation through an increase in earnings per share (EPS) should prefer ASRs, which generally have a more immediate and significant impact on EPS relative to open market repurchases (OMRs). For a sample of repurchase firms, we find evidence that managers who have performance-contingent SERPs in place (i.e., a SERP based on salary and bonus or on average earnings), together with EPS-based bonuses and a share repurchase that results in a higher EPS number, are significantly more likely to choose an ASR versus an OMR. JEL Classifications: G34; G35; M4; M41; M52. Data Availability: The data are available from public sources identified in this study.
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Albaity, Mohamed, and Diana Syafiza Said. "Impact of Open-Market Share Repurchases on Long-Term Stock Returns." SAGE Open 6, no. 4 (October 2016): 215824401667019. http://dx.doi.org/10.1177/2158244016670199.
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After the Asian financial crisis in 1997, firms listed on Bursa Malaysia were allowed to repurchase their shares on the open market. The number of companies engaged in share buyback is increasing and has become a tool to stabilize price by signaling undervaluation of the share. However, studies on share buyback in Malaysia are limited to the price performance surrounding the buyback events. This study aims to fill this gap by examining long-run price performance after the actual share buyback event over a sampling period of 2 years from 2009 to 2010 for Malaysian firms listed on FTSE Bursa Malaysia. There is no evidence to conclude that there exist long-term abnormal returns using the calendar-time portfolio approach that support the inefficient market hypothesis. On the contrary, buy-and-hold method was found to be significant supporting that the Malaysian stock market is semi-strong efficient.
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Chieh Liang, Wei, Yao Chun Tsao, Wen Kuei Chen, Hsing Chau Tseng, and Ke Jian Yu. "Stock repurchase effect with loan or idle fund." Management Decision 52, no. 7 (August 12, 2014): 1236–44. http://dx.doi.org/10.1108/md-11-2012-0790.
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Purpose – The purpose of this paper is to integrate Modigliani-Miller (MM) theory and stock repurchases strategy to procure a practical concept for capital decision. Design/methodology/approach – No-arbitrage proof model deduction was used in this study. The authors consider corporate tax and funding sources as two crucial factors drawn in the model. The paper derives some propositions by trichotomy property and keeps the key assumptions of MM Capital Structure Theory. Findings – There are two different effects on firm's value through stock repurchases. The positive effect occurs on firm's value through stock repurchases with loan fund. And the negative impact exists on firm's value through stock repurchases with idle fund. Research limitations/implications – Notably, in the real world there are three limitations with such an arbitrage transaction (Stulz, 2000). The first one is the default risk, and the second one is transaction costs and the last one is the perfect credit market assumption. In the near future, the authors suggest it would be interesting to involve the interest rate factor and contingent tax variable into our model. Originality/value – On the basis of no arbitrage opportunity, this paper considers both trichotomy property and MM theory. It proves the share repurchase strategy should be financed by borrowing fund. In contrast, share repurchase should not be executed with idle fund because of opportunity cost.
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Badshah, Koerniadi, and Kolari. "Testing the Information-Based Trading Hypothesis in the Option Market: Evidence from Share Repurchases." Journal of Risk and Financial Management 12, no. 4 (November 29, 2019): 179. http://dx.doi.org/10.3390/jrfm12040179.
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The informed options trading hypothesis posits that option prices lead stock prices. In this paper, we extended the research on this hypothesis to open-market share repurchases. Empirical tests showed that the implied volatility spread was not significantly related to buy-and-hold abnormal stock returns. However, further evidence reveal a significant relationship between implied volatility spread and subsequent stock return volatility around open-market share repurchase events. We concluded that option traders have private information on the volatility of stock returns and superior information processing ability that accounts for prescient pricing behavior in options relative to stocks.
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Kaźmierska-Jóźwiak, Bogna, Nicolene Wesson, and Gretha Steenkamp. "Share Repurchases Versus Dividends: A Comparison Between Poland And South Africa." Ekonomia Międzynarodowa, no. 38 (December 28, 2022): 72–89. http://dx.doi.org/10.18778/2082-4440.38.01.
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The main aim of the study is to compare share repurchase and dividend payout trends of listed non-financial and non-resource companies in Poland and South Africa over the period 2005–2015. Although South Africa is a developing country with a dualistic economy, the country is characterized by a sophisticated stock exchange which is comparable to that of most advanced economies, while Poland was reclassified from emerging market to developed market status, effective as from 24 September 2018. Comparative analysis provides insights on the regulatory differences and the effect therefore on share repurchase and dividend behaviour, and whether these countries mirror the excessive payout behaviour observed in the United States of America (US). The study results show that in both countries dividends are the dominant form of payouts to shareholders. Moreover none of the examined countries mirrors the excessive payout behaviour observed in the US – neither in Poland, nor in South Africa did share repurchases surpass dividends. Regulatory differences between Poland and South Africa, however, affected the observed trends in payout behaviour between the two countries.
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Varma, Urvashi, and Alka Munjal. "A Study of Motivators of Tender Offer Repurchases in the Indian Environment." IRA-International Journal of Management & Social Sciences (ISSN 2455-2267) 4, no. 2 (September 7, 2016): 447. http://dx.doi.org/10.21013/jmss.v4.n2.p14.
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<div><p><em>Share buybacks are a 15 year old process in India. In developed countries share buyback is a well-accepted practice but in India the concept has yet to gain popularity. The article tries to look at the tender offer repurchases in Indian between the periods 2004 to September 2013. There were 51 public announcements for share buyback through tender offer route. The other popular method is open market repurchase. The paper tries to identify the main drivers in the tender offer repurchase through regression analysis. The more significant drivers are reduction of earnings per share through buyback, correction in capital structure and improvement in return ratios like return on net worth . The paper also looks at identifying the impact on promoter’s holding through tender offer buyback and identify if it is one of the drivers of share buyback.</em></p></div>
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Gyimah, Daniel, Antonios Siganos, and Chris Veld. "Effects of financial constraints and product market competition on share repurchases." Journal of International Financial Markets, Institutions and Money 74 (September 2021): 101392. http://dx.doi.org/10.1016/j.intfin.2021.101392.
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Feng, Liang, Kuntara Pukthuanthong, Dolruedee Thiengtham, H. J. Turtle, and Thomas J. Walker. "The Effects of Cash, Debt, and Insiders on Open Market Share Repurchases." Journal of Applied Corporate Finance 25, no. 1 (March 2013): 55–63. http://dx.doi.org/10.1111/j.1745-6622.2013.12006.x.
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Liu, Nan. "Refinement of the FCF motive for stock repurchases." Asian Review of Accounting 28, no. 2 (April 30, 2019): 213–28. http://dx.doi.org/10.1108/ara-03-2018-0067.
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Purpose The purpose of this paper is to investigate factors that influence the free cash flow (FCF) motive for stock repurchases. Specifically, it examines whether the positive association between FCF and open-market repurchases is partially driven by abnormal cash flows, and whether external analyst monitor and financial crisis influence the association. Design/methodology/approach The study employs a tobit regression model to test the hypotheses. Findings First, the results suggest that the positive association between FCF and stock repurchases is partially driven by abnormal cash flows. Second, the association between pre-managed FCF and stock repurchases is strengthened as more analyst following the firms. Third, firms repurchase less when they report more negative abnormal cash flows, and that tendency is more pronounced during the 2008 financial crisis period. Further analysis shows that during the crisis period, the effect of negative abnormal cash flows on operating performance gets stronger. Originality/value The study makes several contributions to the literature. This paper is the first to show that managers use abnormal cash flows to fulfill the share buy-backs. In addition, it shows that analysts provide effective external monitoring by strengthening the association between pre-managed FCF and repurchases. Furthermore, it finds that firms adjust their strategy in times of financial crisis period in response to the increased risk. Finally, it contributes to the earnings management literature by showing the differential effects of accruals management and cash flow management on earnings performance.
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Su, Nai-Hui, and Chan-Jane Lin. "The Impact of Open-Market Share Repurchases on Long-Term Stock Returns: Evidence from the Taiwanese Market." Emerging Markets Finance and Trade 48, sup2 (July 2012): 200–229. http://dx.doi.org/10.2753/ree1540-496x48s212.
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Pienaar, H. P., and J. D. Krige. "Market Reaction To Open Market Share Repurchases On The Johannesburg Stock Exchange Over The Period 2000 To 2007." Studies in Economics and Econometrics 36, no. 3 (December 1, 2012): 101–22. http://dx.doi.org/10.1080/10800379.2012.12097240.
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Hjelmstad, Magnus, Andrew Marshall, and Thomas Walmsley. "Open market share repurchases in the UK: evidence on the agency theory of free cash flow." Applied Financial Economics Letters 2, no. 6 (November 2006): 383–87. http://dx.doi.org/10.1080/17446540600706791.
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Gupta, Jyoti, and Florian Wagner. "The Announcement Effect of Open-Market Share Buybacks: The Case for European Firms." International Journal of Economics and Finance 10, no. 8 (July 11, 2018): 117. http://dx.doi.org/10.5539/ijef.v10n8p117.
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Using a comprehensive sample of 1830 open-market repurchases of 15 European countries encompassing the period from 1998 until 2013, we analyzed the magnitude and determinants of the share price reaction on announcement. Our results indicate that buyback announcements in Europe lead on average to a significantly positive abnormal return of 0.92% on announcement day, however, decreasing in firm size and announcement frequency. Additionally, our findings show that the market does not particularly greet the distribution of excess cash to shareholders, but rather when companies take advantage of undervalued stock as market-to-book values are inversely related to announcement returns. Looking at the companies’ leverage ratios, the motive of capital structure optimization cannot be supported by the empirical findings. Lastly, with respect to managerial market timing ability we could not observe that buybacks are following a period of share price underperformance, concluding that managers are not able to time the implementation of buyback programs.
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Capizzi, Vincenzo, and Renato Giovannini. "In search for the determinants of share repurchases policies in the Italian equity capital market: An event study." Corporate Board role duties and composition 7, no. 1 (2011): 33–47. http://dx.doi.org/10.22495/cbv7i1art3.
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In the last decade the number of buyback transactions involving listed companies in the Italian equity capital market has experienced a huge growth. However, no clear understanding of this phenomenon has yet been reached, also because of the limited information available on such financial decisions. The purpose of this paper is to check the main hypotheses behind the determinants of share repurchases, analysing the effect of own share buyback announcements specifically on the performance of the listed companies before and after the discontinuity introduced in Italy through the Reform of the financial markets. The first major outcome coming from the empirical analysis deals with the strong incentive played by the reform mentioned above, which introduced stricter corporate governance criteria, leading to a sharp increase in the volume and frequency of share buyback announcements, as well as in the number of companies getting access to this instrument. Secondly, the analysis strongly supports the replacement hypothesis theory, which states that buybacks have become a better substitute for dividends as a remuneration policy for shareholders.
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Kuzucu, Narman. "A Survey of Managerial Perspective on Corporate Dividend Policy." International Journal of Research in Business and Social Science (2147-4478) 4, no. 2 (April 22, 2015): 1–19. http://dx.doi.org/10.20525/ijrbs.v4i2.22.
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This research paper examines the corporate dividend payout behaviors of non-financial firms from Istanbul Stock Exchange (Borsa Istanbul). Survey method is conducted to investigate managerial views on corporate dividend policy. The study investigates whether the evidence in Turkish stock market on dividend policy is similar to the European and the U.S. firms’ results which are reported earlier by other studies, and moreover in what extent Lintner’s (1956) findings on dividends is supported by today’s listed firms in an emerging market. The financial managers from 38 firms out of 216 non-financial companies responded the survey. The results show that there is a significant positive relationship between cash dividends and earnings. Earnings are viewed as the most important factor in dividend decision like in European and the U.S. firms. Sustainable change in earnings, stability and level of future earnings, and the desire to distribute a proportion of earnings to shareholders are the common determinants of dividend policy. The majority of the respondents reports that they target dividends. Dividend yield is the most common measure for dividend targeting. Share repurchases are not viewed as alternative to dividend payouts unlike the U.S. firms. The study finds supporting evidences for bird-in-the-hand and signaling hypotheses, and Lintner’s model.
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Punwasi, Kiran, and Pradeep Brijlal. "The market reactions to share repurchase announcements on the JSE: an event study." Investment Management and Financial Innovations 13, no. 1 (April 8, 2016): 191–205. http://dx.doi.org/10.21511/imfi.13(1-1).2016.06.
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This study examines the market reactions to share repurchase announcements made by companies listed on the Johannesburg Stock Exchange from the years 2003 to 2012. The authors use an event study methodology and the Capital Asset Pricing Model to determine if there was an announcement effect when a share repurchase announcement is made. The analyses reveal that consistent with signalling theory and the announcement effect, share repurchase announcements are associated with positive abnormal returns. The average abnormal return and cumulative average abnormal return noted was 0.46% and 3.81%, respectively, for the event period (t-20, t+20). There was an observable trend of declining share prices before the share repurchase announcement. The authors also found no significant evidence that repurchasing firms have market timing ability when executing a share repurchase announcement. From a value investor’s perspective, a share repurchase program conveys a very strong signal of a healthy company
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Kowerski, Mieczysław. "Payout Policy of European Companies." Barometr Regionalny. Analizy i Prognozy 15, no. 3 (January 12, 2018): 11–28. http://dx.doi.org/10.56583/br.421.
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Despite Europe’s global importance, very little published research has examined payout policy on this continent. The rather scarce research which has been conducted in this field throughout European companies cover different countries, groups of companies and timeframes, which makes it very difficult to perform comparisons and formulate proper conclusions. The aim of this work is to analyze the payout policy of European companies with comparison to companies outside the European market. Research on the literature has been performed as well as own analyses. The most important tendencies of the European companies’ payout policy have been formulated. Companies in Europe have higher propensity to pay dividends than their counterparts outside Europe and increasing, yet still variable, payout values, both dividends and share repurchases. European companies transfer a substantially bigger part of their net profit to their shareholders than their counterparts from the other continents. An increment in the dividend payout ratio in Europe is clearly visible over the last couple of years. High dividend yields of European companies compensate low yields of governments and corporate bonds.
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De Franco, Gus, Florin P. Vasvari, Dushyantkumar Vyas, and Regina Wittenberg-Moerman. "Debt Analysts' Views of Debt-Equity Conflicts of Interest." Accounting Review 89, no. 2 (October 1, 2013): 571–604. http://dx.doi.org/10.2308/accr-50635.
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ABSTRACT We investigate how the tone of sell-side debt analysts' discussions about debt-equity conflict events affects the informativeness of debt analysts' reports in debt markets. Conflict events such as mergers and acquisitions, debt issuance, share repurchases, or dividend payments potentially generate asset substitution or wealth expropriation by equity holders. We document that debt analysts routinely discuss these conflict events in their reports. More importantly, discussions about conflict events that we code as negative are associated with increases in credit spreads and bond trading volume. Consistent with the informational value of debt analysts' discussions in secondary debt markets, we find that negatively coded conflict discussions predict higher bond offering yields in the primary bond market. In additional analyses, we measure the tone of debt analysts' discussions based on their disagreement with the tone of equity analysts' discussions and find that the informativeness of debt analysts' reports is higher when our coding indicates that conflict events are viewed negatively by debt analysts but positively by equity analysts. JEL Classifications: G12, G14, G32, M49.
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Kulik, Yulia, and Svetlana Makarova. "Capital Structure Management by Share Repurchase for Companies in Emerging Markets." Journal of Corporate Finance Research / Корпоративные Финансы | ISSN: 2073-0438 12, no. 3 (December 9, 2018): 39–59. http://dx.doi.org/10.17323/j.jcfr.2073-0438.12.3.2018.39-59.
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According to foreign research into developed markets, share repurchasing influences the speed of adjustment of companies’ capital structure to the target level. It is worth noting that the number of such research studies for emerging markets is rather small.
On the basis of an empirical study of a selection of 275 companies from BRICS countries involved in share repurchase for the period of 2005 to 2015 we prove here that share repurchase is an efficient method of correcting an existing capital structure, aligning it to approximate a target level in all BRICS countries. It should be noted that in accordance with our results, companies from Brazil and Russia show the highest speed of adjustment (within 63–80%). This indicates that these companies are able to achieve the target structure within a very short period. Companies from the other countries (India, China, and South Africa) also show a rather high rate of the speed of adjustment (in the range of 44 to 49%).
It is worth noting that apart from the share repurchase itself, characteristic features of the companies (as well as special characteristics of local economic factors where they are relevant) influence the speed of adjustment to the target capital structure. We also found out that the most significant factors which have positive effects on the speed of adjustment are the company size, its growth prospects, share of repurchased shares, economic growth rate, inflation rate in the country which adversely affect to a great extent the speed of adjustment to the target capital structure. For Russian companies the most significant determinants are the company size, share of repurchased shares and inflation rate.
An assessment of the speed of adjustment to the target capital structure of companies repurchasing shares showed that for Russian companies (for a balance sheet leverage) and for South African companies (for a market financial leverage) the speed of adjustment is not significant, however in general the countries selection and each sub-selection shows that BRICS countries’ companies are prone to adjust to the target capital structure quicker when the financial leverage is lower than the target value, while companies with an excess debt load optimize much slower.
On the basis of the research results we offer an algorithm pertaining to capital structure management for the companies acting in emerging markets using share repurchase in an open market.
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Koussis, Nicos, and Vladislav Ruzinskii. "Speed of Adjustment in Dividend Payout Decisions: A Comparative Analysis of Developed and Developing Countries." Journal of Corporate Finance Research / Корпоративные Финансы | ISSN: 2073-0438 13, no. 2 (November 20, 2019): 7–24. http://dx.doi.org/10.17323/j.jcfr.2073-0438.13.2.2019.7-24.
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The analysis of dividends payout policy has been apopular subject of research since the middle of the 20thcentury. Despite a huge number of investigations thereis no consensus opinion as to the best practices in thefield. Over the years, different hypotheses have been putforward proposing various methodologies. Some workingpapers underline share repurchase as the best approachtowards payout policy [1]. On the other hand, there aresome investigations which emphasize the opposite pointof view: that dividends are more preferable [2]. Anotherexplanation states that there is no qualifiable difference intypes of payout policy [3]. However, the majority of recentworking papers argue that the best approach is to combine share repurchases and dividends [4].Academic investigations into payout policy began withLintner’s working paper [5]. This research includes notonly financial modeling and results based on regression analysis, but also presents information concerningthe preferences of top-management in payout policydecisions. As a result of interviews with top managers,Lintner identified the existence of a target value fordividend payouts. So, managers tried to maintain theshare of net income attributed to dividends instead ofthe value of dividends themselves. Moreover, Lintnerfound that there is a pertinent speed of adjustment1individend policy. This phenomenon is described by thefact that in case of significant net income changes, firmsdo not pay all the dividends targeted at a specific level ofnet income. Companies only adjust the level of dividendsin the direction of the changes. Lintner also providedan explanation of this fact. It was noted that companies’top management was sure that significant changes in dividends can be negatively appraised by the stock market,especially in case of a fall in the value of dividends. So,managers understate the changes in dividends to betterassure that next year’s profit can cover the new dividends. However, next year’s net income also incurs somefluctuations, so it it is necessary to make some adjustments to dividends. As a result the process of dividendadjustment becomes permanent.The investigation of Brav et al. [6] also was devoted to theanalysis of payout policy, and included interviews with alarge number of CFOs. This research confirms the mainresults of Lintner’s work, but with some limitations. Thestudy carefully analyzed the existence of any target level inpayout decisions. The authors found that only 6% of CFOsdo not target dividends at all. However, in contrast toLintner’s work the majority of CFOs (approximately 40%)answer that their key target is dividends per share. Only28% try to target a dividends payout, and 27% of managers target dividends per share growth. This investigationshows that nowadays, targeting dividends per share is amore common practice than targeting payouts. Despite the fact that these results display some differences fromLintner’s one, they do not reject the hypothesis aboutexistence of dividend smoothing.
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Gan, Christopher, Chao Bian, Damon Wu, and David A. Cohen. "Determinants of share returns following repurchase announcements in China." Investment Management and Financial Innovations 14, no. 2 (May 31, 2017): 4–18. http://dx.doi.org/10.21511/imfi.14(2).2017.01.
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By combining the market model with the three-factor model, this study investigates firms’ share returns after the announcement of share repurchase. Employing data for China’s A-share market, this study’s sample utilizes 417 share repurchase announcements over the period of 2000 to 2012. Empirical results show that firms with higher sales growth rates are more likely to send a positive signal to the market through their share repurchase efforts. Analysis also shows that the higher a firm’s price-to-earnings ratio (utilized as a measure of overvaluation), the lower the firm’s cumulative abnormal returns. These results imply that Chinese share markets put more emphasis on the firm’s future growth and share overvaluation.
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Nguyen, Thanh T., Ninon K. Sutton, and Dung (June) Pham. "The post-repurchase announcement drift: an anomaly in disguise?" Managerial Finance 41, no. 2 (February 9, 2015): 205–24. http://dx.doi.org/10.1108/mf-02-2014-0038.
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Purpose – The purpose of this paper is to reexamine the stock price drifts after open-market stock repurchase announcements by differentiating actual repurchases from repurchase announcements and by controlling for the repurchasing firms’ earnings improvement in the announcement year relative to the prior year. Design/methodology/approach – The authors use the calendar-time method and matching method based on different criteria to calculate the post-announcement abnormal returns. Findings – The results show that only firms actually repurchasing their shares exhibit a positive post-announcement drift. More importantly, the authors find that these repurchasing firms have the same post-announcement drift as their matching firms that have similar size and earnings performance but do not repurchase. This supports the argument that the post-repurchase announcement drift found in previous studies is not a distinct anomaly but the post-earnings announcement drift in disguise. Social implications – The post-repurchase announcement drift found in previous studies is the post-earnings announcement drift in disguise. Originality/value – The study shows that because high earnings performance positively relates to real repurchase activities, controlling for earnings performance in examining whether a drift occurs after repurchase announcements.
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Ong, Tze San, and Pei San Ng. "The Effects of Share Repurchase Announcements on Returns in the Malaysia Stock Market." Indonesian Journal of Business Finance and Accounting 1, no. 1 (January 3, 2018): 1. http://dx.doi.org/10.32455/ijbfa.v1i1.44.
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This paper examines the market response surrounding the share repurchase announcements of Malaysia Listed Companies from years 2012 to 2016. One sample T-test was carried out to identify the abnormal return in the range before and after 20 days from share repurchase announcements. The result shows a significant positive abnormal return in the day of repurchase announcements and continuously until day 1 after the announcements. Multiple regression analysis was performed in order to identify the firm characteristic of share repurchase. The finding is supported with information asymmetric, which shows that stock market reacts more favorably through the repurchase announcements by small firms than large firms. This study is consistent with the signaling hypothesis that shows share repurchase announcement can be an effective tool in stabilizing the stock market in Malaysia. The finding of this study acts as a useful tool for managers and investors to improve their decisions on share repurchase announcements in Malaysia. Company’s managers can conduct share repurchase announcements that are able to make the stock market react positively in order to generate positive abnormal returns.
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Chatterjee, Chanchal, and Paromita Dutta. "Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in India." Vikalpa: The Journal for Decision Makers 40, no. 4 (December 2015): 435–43. http://dx.doi.org/10.1177/0256090915611773.
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Executive SummaryThis article examines the impact of open market share repurchase announcements on stock returns in the Bombay Stock Exchange (BSE). The main objective is to examine whether share repurchase announcements under the open market route have any significant impact on the returns of the stocks traded in the BSE. The article covers the period from 2009 to 2013. For sample selection, two criteria were used: first, the firm should have been listed in the BSE for at least 28 trading days before the repurchase announcement date, and second, the firm should have all relevant data required by this study. A total of 95 repurchase announcements fulfilled these criteria. The analysis period extended from –28 to +28 trading days relative to the repurchase announcement date ( t = 0). The findings of the study will help us to understand how the market responds to share repurchase announcements in India and whether a firm actually benefits by repurchasing its own shares from the market.This study uses a standard event methodology based on an ordinary least squares market model with the aim of finding out whether repurchase announcements generate any abnormal return around the repurchase announcement date. While applying the market model for estimating the abnormal returns, the regression is estimated based on the stock return of the firm and market return of the previous 120 trading days. So, here the estimation window takes into account 120 observations. Using this, the expected returns are generated and then the abnormal returns are derived for the event window, 28 days prior to the event date and 28 days after the event date.The findings of the study indicate that share repurchase announcements do not necessarily generate abnormal stock returns in the Indian equity market unlike developed economies like the US, Canada, and Australia. The whole sample is further divided into various subsamples on the basis of firm size and size of repurchase. The subsample analyses reveal that smaller firms do not necessarily experience higher abnormal stock returns following repurchase announcements than that of the larger firms. The findings weakly support the view that larger repurchase size generates greater abnormal stock returns than the smaller ones.
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Baker, H. Kent, and Rob Weigand. "Corporate dividend policy revisited." Managerial Finance 41, no. 2 (February 9, 2015): 126–44. http://dx.doi.org/10.1108/mf-03-2014-0077.
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Purpose – The purpose of this paper is to provide an overview and synthesis of some important literature on dividend policy, chronicle changing perspectives and trends, provide stylized facts, offer practical implications, and suggest avenues for future research. Design/methodology/approach – The authors provide a survey of literature surveys with a focus on insights for paying cash dividends. Findings – The analysis of literature surveys on dividend policy provides some stylized facts. For example, US evidence indicates that the importance of cash dividends as a part of investors’ total returns has declined over time. Share repurchases now play an increasingly important role in payout policy in countries permitting stock buybacks. The popular view is that dividend policy is important, as evidenced by the large amount of money involved and the attention that firms, security analysts, and investors give to dividends. Firms tend to follow a managed dividend policy rather than a residual dividend policy, which involves paying dividends from earnings left over after meeting investment needs while maintaining its target capital structure. Certain determinants of cash dividends are consistently important over time in shaping actual dividend policies including the stability of past dividends and current and anticipated earnings. No universal set of factors is appropriate for all firms because dividend policy is sensitive to numerous factors including firm characteristics, market characteristics, and substitute forms of dividends. Universal or one-size-fits-all theories or explanations for why companies pay dividends are too simplistic. Practical implications – The dividend puzzle remains an important topic in modern finance. Originality/value – This is the first a survey of literature surveys on cash dividends.
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Yang, Mingzhu. "The Impact of Share Repurchase on the Value of Listed Companies Take Alibaba Group as an Example." E3S Web of Conferences 235 (2021): 01026. http://dx.doi.org/10.1051/e3sconf/202123501026.
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Share repurchase is a common dividend policy and financial policy in western listed companies. The share repurchase policy has some positive and negative effects on the company. Therefore, this paper takes Alibaba Group as an example, and studies its share repurchase policy from 2014 after its listing to 2019. A theoretical and empirical analysis on the profitability, market value and stock price of listed companies through share repurchase is conducted. The result shows that it has positive effects on corporate profitability, market value and capital structure. At last, suggestions based on the analysis are proposes.