Share repurchases, rather than dividend payments, are increasingly becoming the globally favoured payout method. This has prompted a renewed interest in the field, and raises questions about the actual motivation for share repurchases and whether companies are now repurchasing shares in preference to investing in future growth. This study set out to ascertain whether South African company payout behaviour mirrors global company behaviour. Comprehensive data on share repurchases are, however, not compiled by South African financial data sources or by the Johannesburg Stock Exchange Ltd. In preparation for this study, the authors thus compiled the first comprehensive share repurchase database for companies in selected JSE-listed sectors for the first 11 years (i.e. 1999 to 2009) since share repurchases were first allowed in this country.Share repurchases were found to be a popular payout method, especially in the more recent periods covered in the study. Payout value was dominated by a few companies paying dividends every year and regularly repurchasing shares. Aspects unique to the South African regulatory environment, however, resulted in the South African share repurchase experience not fully mirroring current global practice. The main constraint in the South African share repurchase environment is that comprehensive, actual-time-based share repurchase data are not available. Recommendations are made on how to align the South African regulatory environment with global best practice. Regulatory changes, as well as continued research in the field, will equip stakeholders to make informed decisions.

No abstract

PurposeShare repurchases are increasingly employed in South Africa. Disclosure on share repurchases in annual reports is poor, and a high percentage of share repurchases are not announced in real time on the Johannesburg Stock Exchange (JSE). A comprehensive database of share repurchases by JSE-listed companies has been created up to 2009, but post-recession repurchase behaviour is not known. This study aims to examine South African share repurchase behaviour (activity, repurchase entity, repurchase type and transparency) in the post-recession period and compare this to the 2000–2009 period.Design/methodology/approachComprehensive share repurchase data for all JSE-listed companies (excluding those in the basic materials and financial industries) were obtained by scrutinising annual reports and JSE announcements.FindingsThe repurchasing of shares reached a peak during the financial recession of 2008/2009, with share repurchases stabilising at a lower level post-recession. Repurchases executed by subsidiaries have decreased post-recession, probably owing to the introduction of dividends tax. However, 45% of the share repurchase value was not announced via the JSE (compared to 22% in 2000–2009).Practical implicationsReal-time JSE announcements of all share repurchases are required to improve transparency.Originality/valueOwing to low announcement rates, a lack of transparency relating to share repurchases was observed in South Africa post-recession. Enhanced corporate governance requirements could improve transparency.

Background: Dividend payout is one of the most debated contemporary corporate finance issues. No universal theoretical model describes the factors that corporate managers consider in dividend payout decisions. This study extends previous South African empirical research on dividend payout trends and motivations for Johannesburg Stock Exchange (JSE)-listed industrial companies over the period 1999-2014. The study period coincides with the introduction of share repurchases as an alternative distribution method, covers multiple dividend distribution regulatory amendments and overlaps the global financial crisis of 2008. Objectives:The aim of this study was to ascertain whether the global financial crisis of 2008 affected dividend payouts and to identify factors that influenced dividend payout decisions of JSE-listed industrial companies over the period 1999-2014.Method: Descriptive statistics and a fixed-effects panel regression analysis were applied to dividend data extracted from published annual reports of JSE-listed industrial companies over the period 1999-2014.Results: Dividend distributions of JSE-listed industrial companies increased over the study period in contrast to declining global dividend distribution trends. A significant increase in dividend payout was found when comparing pre-and post-recession periods, in line with the positive impact of dividend distribution regulatory reforms. Company size (+), profitability (+), sales growth (-) and free cash flow (-) were identified as significant factors that influence dividend distributions of JSE-listed industrial companies. Conclusion:The results offer support for the company life cycle hypothesis, the taxes and clientele hypothesis and corporate managers' preference for stable dividend policies.

No abstract