Incentives for on-market buy-backs: Evidence from a transparent buy-back regime

The Determinants of Share Repurchases in Europe

“…We find evidence that the differences in country characteristics are important in making buyback announcements. In particular, in the UK and Germany, dividends and share buybacks seem to be complements rather than substitutes (Mitchell and Dharmawan, 2007), whereas in France, share buybacks substitute dividends as shown by the negative coefficient of cash dividends consistent with and Skinner (2008). In addition, we find that the tax advantage of share repurchases over cash dividends has a significant influence on managers' decisions to make buyback announcements.…”

“…An additional limitation in Jain et al (2009) is that buybacks and dividends are treated as perfect substitutes despite the controversial empirical evidence on the matter (e.g., De Angelo et al, 2000;Jagannathan et al, 2000;Dittmar, 2000;Mitchell and Dharmawan, 2007;Denis and Osobov, 2008). Similarly, Chay and Suh (2009) find that mature firms with low cash flow uncertainty are more likely to pay dividends supporting the life-cycle theory of dividends (De Angelo et al, 2006;Denis and Osobov, 2008).…”

Prediction of open market share repurchases and portfolio returns: evidence from France, Germany and the UK

“…In line with this argument, are the findings of Mitchell and Dharmawan (2007) who find that firms which are small and announce their intention to repurchase a large fraction of their outstanding capital, have a significant signalling impact. In addition, Dittmar (2000), Grullon and Michaely (2002), and Ikenberry et al (1995) report evidence that size has a positive relationship with the volume of share repurchases.…”

“…In the discussion that follows we briefly outline those variables and the rationale for their inclusion in the present study. The correlation coefficients are provided in repurchases can be considerably more flexible as a payout method compared to dividends, and existing evidence suggests that firms are more likely to repurchase their stock when they have high cash flows and low investment opportunities (Dittmar 2000;Mitchell and Dharmawan 2007). As in Dittmar (2000), to proxy for excess cash we use the ratio of net operating income before taxes and depreciation to total assets at the year-end prior to the repurchase announcement (Cash Flow).…”

“…Consequently, Bagwell and Shoven (1988) and Hovakimian et al (2001) argue that a share repurchase programme, displays the managers' preference to employ debt instead of equity, so that they can approach their target leverage ratio. Indeed, a number of empirical studies report evidence that firms with low leverage are more likely to repurchase their shares (Hovakimian et al 2001;Mitchell and Dharmawan 2007;Dittmar 2000). Therefore, to proxy for leverage we use the ratio of total debt to total assets at the year-end prior to the repurchase announcement (Leverage).…”