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John Philip Evans - One of the best experts on this subject based on the ideXlab platform.
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do strategic Share Repurchase programs create long run firm value
Social Science Research Network, 1998Co-Authors: John Philip EvansAbstract:An unresolved question is?Do strategic Repurchase programs create long-run firm value? An objective of this paper is to analyze the long-run growth in value of companies that strategically Repurchase Shares vis-a-vis those that do not pursue a Share buyback strategy. Prior studies have not focused on the linkage between Share Repurchases and the growth in firm value. The analysis focuses on the hypothesis that the growth in the value of firms initiating Repurchase strategies is greater than the growth in the value of the matched companies. The results show that in the short-run companies that pursue a strategy of repurchasing Shares have a higher growth rate than compnies not exercising a buyback strategy. However, the results are not statistically significant. The study indicates that in the long-run firms create more value with a strategy of not repurchasing its Shares. Additionally, it was discovered that small and mid-size non-repurchasing companies outperform firms employing a Share buyback strategy. Regression analysis was used to test the relationship between growth in firm value and the performance of the free cash flow components of the two types of firms in the sample. The results show that investment by non-repurchasing companies in net working capital and capital projects were instrumental in their outperforming companies using a Repurchase strategy. In conclusion, the findings do not support the theory that Share Repurchase programs are related to management signaling an increase in a firm?s long-run performance in the market. Nor does the study show that a strategy to Repurchase Shares signals that Shares are undervalued.
Chandrasekhar Krishnamurti - One of the best experts on this subject based on the ideXlab platform.
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what drives the declining wealth effect of subsequent Share Repurchase announcements
Journal of Risk and Financial Management, 2020Co-Authors: David K Ding, Hardjo Koerniadi, Chandrasekhar KrishnamurtiAbstract:Recent academic studies document that open market Share Repurchase announcements in the United States generate significantly lower returns than those reported in earlier studies. We find that the lower announcement return is associated with an increasing number of subsequent announcements in the more recent periods. Although the announcement period return from the initial announcement is positive, subsequent announcement returns are significantly decreasing. Further, we find that the decreasing returns of subsequent announcements are attributed to firms with negative past Repurchase announcement returns. Our multivariate regression test results are consistent with the notion that the decreasing subsequent Repurchase announcement returns are driven by hubris-endowed managers.
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what drives the declining wealth effect of subsequent Share Repurchase announcements
Social Science Research Network, 2017Co-Authors: David K Ding, Hardjo Koerniadi, Chandrasekhar KrishnamurtiAbstract:Recent academic studies document that open market Share Repurchase announcement period returns are much lower than those reported in early studies. This study finds that the lower announcement returns are attributed to repeat announcements that dominate the sample in the recent period. The announcement period return of the initial Repurchase program launched by a repeat repurchasing firm on average is positive. However, the more this firm repeats its Repurchase announcement, the lower its announcement period abnormal returns. Further tests reveal that firms with negative past Repurchase announcement returns are more likely to repeat their Repurchase programs, which result in lower announcement returns. Our results are consistent with overconfident managers drive the lower Repurchase announcement returns.
Allan A Zebedee - One of the best experts on this subject based on the ideXlab platform.
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Share Repurchase offers and liquidity an examination of temporary and permanent effects
Financial Management, 2008Co-Authors: Nandkumar Nayar, Ajai K Singh, Allan A ZebedeeAbstract:Open-market Repurchase programs do not allow for precise estimates of Share buy-back intensity to measure liquidity effects. To circumvent the uncertainty surrounding the quantity and timing of Shares truly acquired in Repurchase programs and to measure their long-term impact, we examine Dutch auctions and fixed-price tender offers. We investigate both the temporary and permanent liquidity effects of Share Repurchase programs andfind that the improvement in liquidity is tran sitory and limited to the tender period when the firm s offer to Repurchase Shares is outstanding. Improvements in liquidity over longer intervals appear to be the result of an overall price im provement and a reduction in volatility rather than the result of structural change in market dynamics. Share Repurchase programs have taken on an increased importance in recent years. Firms can Repurchase Shares through an open-market Repurchase, targeted Share Repurchase, fixed-price tender offer, or Dutch auction tender offer. In this paper, we examine the short- and long-term effects of firms' self-tender (stock buy-back) programs on the liquidity of the underlying Shares. We believe that the long-term liquidity effects cannot be fully explored in an "open-market Share Repurchase programs" setting because there is no finite date for the conclusion of such programs. If there is no program expiration date, then the researcher cannot determine the precise periods over which to construct the liquidity variables necessary for the empirical analyses. Additionally, firms that conduct open-market Repurchase programs are under no obligation to disclose when, or even if, they Repurchase Shares. Furthermore, open-market Share Repurchase programs are often renewed and can span several years. The indefinite time horizon impedes the researcher's ability to measure the long-term impact of Share Repurchase programs on firm liquidity. To overcome these difficulties, we examine Repurchases using the Dutch auction (DA) and fixed-price tender offer (FPTO) formats. These Share Repurchase formats have two advantages. First, the timing, quantity, and price of Shares acquired for DA/FPTO Repurchases are known because they are announced in company press releases. Second, these Repurchases occur over a relatively short period, typically 30 days. We prefer this shorter time period, since it minimizes the probability of a large-scale structural change (other than the Repurchase per se) or some other The authors thank Nick Dorsey and Sandeep Tanejafor excellent research assistance. Zebedee gratefully acknowledges the financial support of San Diego States Research, Scholarship, and Creative Activity Program. Nay or is grateful for financial support from the Hans Julius B?r Chair. The comments of an anonymous referee and of Anne-Marie Anderson, William Christie, Srini Krishnamurthy, C.N.V. Krishnan, Ji-Chai Lin, and participants in presentations at the Securities and Exchanges Commission (SEC), Asian Finance Association (Kuala Lumpur), the Copenhagen Business School, and the FMA Conference helped to significantly improve the analysis in the paper. We remain responsible for all errors.
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Share Repurchase programs and liquidity an examination of dutch auction Repurchases
Social Science Research Network, 2005Co-Authors: Nandkumar Nayar, Ajai K Singh, Allan A ZebedeeAbstract:ABSTRACT The existing evidence on the liquidity effects of Share Repurchase programs is mixed. However, previous studies focused solely on open market Repurchase programs which do not allow for precise estimates of Share buy-back intensity to measure liquidity effects. Since firms are under no obligation to disclose when (or even if) they are repurchasing Shares, typically little is known about the precise timing and execution of open market Repurchases. Furthermore, open market Share Repurchase programs are often renewed and can span several years. The indefinite time horizon clouds the ability to measure the permanent impact of Share Repurchase programs on firm liquidity. Consequently, we examine Dutch auction Share Repurchase programs to circumvent these problems, and investigate the temporary and permanent effects of Repurchase programs on liquidity. The advantage of studying the Dutch auction format is twofold. First, the timing, quantity, and price of Repurchases are known from company press releases. Second, Dutch auctions occur over a relatively short period (average tender period is typically 30 days). Therefore, our analysis of Dutch auction Share Repurchase programs allows us to investigate the short-term effects that occur over the one-month tender period. More importantly, we can examine possible lasting effects on liquidity after the Repurchase program is over. We find that the improvement in liquidity is transitory and limited to the one-month tender period when the firm’s offer to Repurchase Shares is outstanding. Improvements in liquidity over longer intervals (or permanent impacts due to the Share Repurchase program) appear to be the result of an overall price improvement and a reduction in volatility and not because of a structural change in market dynamics. In sum, our results dovetail with those of Cook, Krigman, and Leach (2004) where improved liquidity occurs on the days when the firm actually enters the market and Repurchases Shares.
Niklas Wagner - One of the best experts on this subject based on the ideXlab platform.
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time for gift giving abnormal Share Repurchase returns and uncertainty
Social Science Research Network, 2020Co-Authors: Nina Anolick, Jonathan A Batten, Harald Kinateder, Niklas WagnerAbstract:Abstract We study Share Repurchase announcements for nine European countries between 2000 and 2017. In contrast to previous studies, we address the role of market uncertainty as a market-based determinant of positive average abnormal announcement returns, while including governance, liquidity risk and firm related control variables. Economic policy uncertainty and financial uncertainty, individually as well as jointly, positively affect abnormal returns. We suggest that this relation is due to a stronger signaling effect under increased uncertainty, as both information asymmetry and underpricing tend to increase. Also, a potential hedge against adverse market movements is more valuable. Optimal timing of Repurchase announcements should therefore consider market uncertainty conditions.
Harold Bierman - One of the best experts on this subject based on the ideXlab platform.
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dividends versus Share Repurchase
World Scientific Book Chapters, 2007Co-Authors: Harold BiermanAbstract:AbstractThe following sections are included:The Option to RetainEqual Tax RatesAdvantages of Share RepurchaseStock Price EffectSummaryQuestions
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Share Repurchase and Earnings Per Share Buyback Parity
Increasing Shareholder Value, 2001Co-Authors: Harold BiermanAbstract:Management should not make decisions based solely on the effect on earnings per Share (EPS) but the reality is that the effect of a decision on EPS does influence choices that businesses make. Will Share Repurchase increase the firm’s earnings per Share? Share Repurchase will always increase EPS compared to an equal dollar amount of cash dividend. The interesting decision problem is to choose between Share Repurchase and real investments.
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Share Repurchase and stock price
2001Co-Authors: Harold BiermanAbstract:What happens to a firm’s stock price when the firm Repurchases its Shares? Initially, we will assume: a the market price is equal to the stock’s intrinsic value b there are no psychological reactions by the stock market or signaling effects c the market has anticipated the effects on stock value of a Share Repurchase program if such a program is to be implemented.
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choosing between real investments and Share Repurchase
2001Co-Authors: Harold BiermanAbstract:Appendix A of this chapter shows that retention (and investment) by the corporation is better than Share Repurchase, from the perspective of the investor, if the corporation earns a higher return (r, after corporate income tax) than the investor earns (rp, after investor tax). This calculation requires that an estimate be made of the after tax return available to the investor. The investor is taxed at the same rate with an immediate cash distribution or a distribution in the future.
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dividends versus Share Repurchase
Research Papers in Economics, 2001Co-Authors: Harold BiermanAbstract:In the past four decades, major U.S. corporations have increasingly Repurchased significant amounts of their own common Shares. The reasons for this development and its implications for the theory of Share valuation and for public policy, however, have been subject to numerous, and often conflicting interpretations.
