The Announcement Effects of Off-Market Share Repurchases in Australia

Brown, Christine Ann

doi:10.1177/031289620703200210

Cited by 18 publications

(32 citation statements)

References 30 publications

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“…As presented in Table , there is a 294% increase in abnormal trading activity on Day 0, 290% on Day +1, 175% on Day +2, and 62% on Day +3, all of which are significant at least at the 5% level. Our evidence is consistent with Brown (), but is larger in magnitude. Brown () finds SAVs of 85% and 53% above normal levels on Day 0 and Day 1, respectively.…”

Section: Resultssupporting

confidence: 92%

“…Following Lakonishok and Vermaelen (), we compute standardized abnormal volume as

S A V_{normalt} = \frac{A V o l_{normalt}}{σ (A V o l_{normalt})}

where

A V o l = \frac{(V o l - N V o l)}{N V o l}

, Vol is the daily trading volume and NVol is an estimate of normal trading volume for each firm over Days −120 through −20 relative to the initial announcement day. Daily mean SAV and nonparametric p ‐value (see, Brown ) for days (−5, +5) are presented later. The columns labeled Mann–Whitney p ‐values give the p ‐values for a test of difference between the FC and non‐FC samples and the scaleback and non‐scaleback samples.…”

Section: Resultsmentioning

confidence: 99%

“…These institutional investors cause price pressure as they attempt to capture the imputation tax credits by buying shares in the announcement period in order to sell those shares into the buyback. Superannuation funds (on a 15% marginal tax rate) and charities (on a zero tax rate) belong to this clientele (Brown and Efthim ; Brown ; Brown and Davis ). The observed positive announcement abnormal returns are related to such a price pressure effect, which is argued to be mainly driven by these institutional investors.…”

Section: Background and Literature Reviewmentioning

confidence: 99%

“…Prior event studies typically investigate the market reaction to the announcement of a buyback by studying returns in a narrow window around the announcement date. Other important dates in the buyback process are generally ignored in these studies (see, Brown ). Our study is different.…”

Section: Introductionmentioning

confidence: 99%

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Off‐Market Buybacks in Australia: Evidence of Abnormal Trading around Key Dates

Yong

Brown

2014

Int Rev Finance

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Off-market share buybacks in Australia are often structured with the buyback price comprising a large dividend component (which may carry imputation tax credits) and a small capital component. This unique structure has the consequence that institutions on low tax rates stand to benefit most from selling shares into the buyback. In this article, we explore evidence of abnormal trading activities around key dates in the conduct of off-market buybacks and investigate the drivers of these activities. We find evidence of abnormal trading activities around the initial announcement and the final announcement dates of the buyback. The significant differences in abnormal volumes between the buybacks with and without imputation tax credits highlight the importance of tax motivations in explaining abnormal trading activities in the shares of companies conducting off-market buybacks, and are consistent with observed buying pressure around the announcement of the buyback.

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Section: Resultssupporting

confidence: 92%

“…Following Lakonishok and Vermaelen (), we compute standardized abnormal volume as

S A V_{normalt} = \frac{A V o l_{normalt}}{σ (A V o l_{normalt})}

where

A V o l = \frac{(V o l - N V o l)}{N V o l}

Section: Resultsmentioning

confidence: 99%

Section: Background and Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Off‐Market Buybacks in Australia: Evidence of Abnormal Trading around Key Dates

Yong

Brown

2014

Int Rev Finance

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“…Prior literature in Australia focused on the role of tax imputation system on the off-market buybacks (Brown and Efthim, 2005;Brown, 2007;Brown and Davis, 2012). Brown (2007) finds that the discount at which shares are bought back through off-market share repurchases affects the announcement returns in Australia. The tax imputation system also affects the redistribution of wealth between participating and non-participating shareholders in buyback activities.…”

Section: Introductionmentioning

confidence: 99%

Factors influencing on-market share repurchase decisions in Australia

Yarram¹

2014

Studies in Economics and Finance

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Access to this document was granted through an Emerald subscription provided by emerald-srm:198285 [] For AuthorsIf you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -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 2004-2010show 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. Originali...

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Are Buybacks Good for Long-Term Shareholder Value? Evidence from Buybacks around the World

Manconi¹,

Peyer²,

Vermaelen³

2018

J. Financ. Quant. Anal.

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Using a sample of over 9,000 buyback announcements from 31 non-U.S. countries, we find support for the results of studies based on U.S. data: On average, share repurchases are associated with significant positive short- and long-term excess returns. However, excess returns depend on the likelihood of undervaluation and the efficiency and liquidity of equity markets. In contrast to findings in U.S. markets, we do not find that these long-term excess returns are simply a compensation for takeover risk or have become less significant in recent years.

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The Announcement Effects of Off-Market Share Repurchases in Australia

Cited by 18 publications

References 30 publications

Off‐Market Buybacks in Australia: Evidence of Abnormal Trading around Key Dates

Off‐Market Buybacks in Australia: Evidence of Abnormal Trading around Key Dates

Factors influencing on-market share repurchase decisions in Australia

Are Buybacks Good for Long-Term Shareholder Value? Evidence from Buybacks around the World

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