شرایط اقتصادی و انگیزه هایی برای بیع متقابل چندگانه سهم بازار آزاد
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|14429||2011||13 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Research in International Business and Finance, Volume 25, Issue 2, June 2011, Pages 156–168
We examine the impact of business conditions on the frequency of share repurchases. The results generally indicate that share repurchase programs are positive and statistically significant in HIGH economic states relative to the other economic states. Segmenting the data into frequency of repurchases, we find evidence suggesting different economic states exert influence on frequent and infrequent but not occasional repurchase programs. Further, we show that firms that institute frequent share repurchasing programs experience stronger returns across different business cycles compared to infrequent and occasional share repurchasers.
Open-market share buybacks have become an established mechanism to distribute cash flows to residual claimants. This program can also be seen as a change in ownership, capital structure and payout policies of the firm. Many potential reasons have been posited to explain why firms purchase their own stock. These include the information-signalling (Dann, 1981, Vermaelen, 1981, Grullon and Ikenberry, 2000 and Jagannathan and Stephens, 2003), free cash flow hypothesis (Jensen, 1986, Lang and Litzenberger, 1989 and Grullon and Michaely, 2002), dividend substitution hypothesis (Jagannathan et al., 2000, Grullon and Michaely, 2002 and Brav et al., 2005), option funding hypothesis (Dittmar, 2000 and Kahle, 2002), capital structure hypothesis (Mitchell and Robinson, 1999, Hovakimian et al., 2001 and Grullon and Michaely, 2004), and the takeover deterrence hypothesis (Stulz, 1988 and Bagwell, 1991). An examination of the literature, however, suggests that signalling is the motive most commonly attributed to share buybacks as a firm's announcement of its willingness to invest in itself is seen by many market participants and researchers as a signal that the stock is undervalued. It is, however, improbable that a firm could credibly signal that its stock is undervalued on a regular basis. Thus, the motivations for repurchasing shares on a frequent basis may differ from reasons to repurchase shares occasionally. This is supported by Jagannathan and Stephens (2003) who segment the frequency of repurchase programs into three categories and find that infrequent, occasional and frequent share buybacks (we defined these below in Section 2) seem to be motivated by different rationales. Share buybacks are mainly seen as an isolated occurrence. The empirical evidence, however, suggests that firms that buyback their shares on the open-market are doing so more frequently (Ikenberry et al., 1995 and Jagannathan et al., 2000). Grullon and Michaely (2002) document a substantial growth of share buyback programs and note that the value of share repurchases has exceeded the value of dividend payments in the US. Similar to the equity markets in the US, share repurchase programs are also common in Canada and the UK. Ikenberry et al. (2000) outline the growth of share buybacks in Canada while Oswald and Young (2004) posit that although very significant, share repurchase programs in the UK are small compared to the US. Parallel to the US evidence, both the UK and Canadian studies suggest that share repurchase announcements are in part a response by management to perceived undervaluation of the firm. Distinct from the North American markets and other developed markets like the UK, many markets in the Asia-Pacific region have only effectively allowed share buybacks in the 1990s. These include Japan, Hong Kong, New Zealand, and Singapore (Firth and Yeung, 2005 and Zhang, 2002).1Zhang (2002) provides evidence indicating that the Japanese market generally interprets share repurchase announcements as positive signals. The evidence further suggests that Japanese corporate managers occasion stock repurchase announcements to take advantage of possible undervaluation by the market. Evidence from Hong Kong suggests that firms initiating share buyback have surplus cash and are undervalued. Also the number of shares repurchased is determined by cash flow availability and prior repurchased programs. Koerniad et al. (2007) investigate share purchases in New Zealand and find evidence supporting the agency and free cashflow hypothesis. Despite the importance of open-market share repurchase in distributing cash flows to residual claimants, the literature on rationale for initiating such programs, particularly motives for multiple repurchase programs, remain thin compared with dividend distribution. We, therefore, provide further evidence on the motivation behind open-market share repurchase programs. Specifically, we extend Jagannathan and Stephens (2003) study by investigating the impact of economic conditions on various categories of stock buyback programs (infrequent, occasional, and frequent) using Australian data. The use of Australian data is motivated at several levels. First, differing taxation systems provide alternate conditions imposed on share buybacks and dividends. For example, Australia and the US operate under dividend imputation system and classical taxation system, respectively. Although share repurchases are taxed on a capital gains basis in both countries, shareholders in the US would prefer excess cash flows to be distributed via a share repurchase program than in the form of a dividend to benefit from the lower taxes on the capital gains (see Black, 1976 and Barclay and Smith, 1988). Brown and Howard (1992) contend that the imputation tax system in Australia, where tax rate on dividend income is lower than that on capital gains, creates a bias towards increasing dividend distributions. This suggests that further examination of the motivation behind multiple stock repurchases using data other than the US is warranted. Secondly, many factors about firm behaviour vary by country (Gilson and Roe, 1993). For instance, there are significant variations in the legal and regulatory environments between the US and Australia. In the US, firms repurchasing their shares transfer them to their respective treasury holdings, which at management discretion can be reissued (Mitchell et al., 2001). On the contrary, the Corporations Law in Australia requires that any shares bought back be cancelled and all rights attached to the shares extinguished.2 Therefore, we provide evidence on the motives for multiple buybacks in a regulatory environment distinct from the US classical tax system. We examine the impact of economic conditions on the differences in the motives for firms that repurchase frequently compared to firms that repurchase only occasionally or infrequently. Dittmar and Dittmar (2007) posit that share repurchase activity occurs in waves driven by changes in economic activity that impacts firms’ surplus cash flow. Jagannathan et al. (2000) also show that firms with higher “temporary” operating cash flows are more likely to use share repurchases, whereas firms who issue dividends exhibit higher “permanent” operating cash flows. This evidence has implications for the state of business activity during the period when the share repurchase programs are initiated. Furthermore, when an economy is running below capacity, firms may react differently to how they distribute their cash flows to residual claimants compared to a higher or booming state. In a booming economy, firms experience abnormal increases in excess cash flow and this can result in firms using share buybacks as opposed to dividends in distributing their excess cash flows, as increasing dividends may signal to the market that increased levels of cash flows can be sustained (Benartzi et al., 1997). Drawing on this idea, we provide a distinction between different motives for share buybacks based on repurchase frequency in different economic conditions. Our empirical investigations suggest that business conditions impact on firms’ decision to repurchase own stock. Specifically, we show that firms who repurchase both frequently and infrequently respond significantly to different business conditions relative to firms who repurchase their shares occasionally. Stock repurchase announcements, generally, are greeted favourably by investors in firms who buyback their shares frequently across all business conditions relative to those who infrequently buyback their stock. We further find that firms that buyback their shares frequently have more stable returns across business conditions relative to firms who initiate share buybacks infrequently. The remainder of the paper is structured as follows. Section 2 presents the data construction procedure and the methodology. Section 3 discusses the empirical findings and Section 4 concludes the paper.
نتیجه گیری انگلیسی
In this paper, we examine the impact of different business conditions on the frequency of share repurchase programs using Australian data. Using Poisson regression models, we find a significant relation between economic conditions and the decision by firms to repurchase their shares. Classi- fying the sample firms into frequent, occasional and infrequent repurchasers, we find that the result for the entire sample is driven mainly by firms that repurchase their shares infrequently. There is a little evidence that different economic states exert influence on frequent repurchasers, whereas occasionally repurchasers are not affected by different economic conditions. Further,wefindthatfirmsrepurchasingtheirsharesoccasionallyarelarger,moreprofitableandpay lower dividend compared to frequent and infrequent repurchasers. We further extend our investiga- tiontoincludemarketreactionstosharerepurchasesindifferentbusinessconditions.Theexamination ofstockreturnsaroundthebuybackannouncementshowthatoverallmarketviewssharerepurchases inapositiveway.Themarketrespondspositivelytosharerepurchaseannouncements,asfirmsreduce their excess cash holdings which send a signal that they are committed to reducing potentially waste- ful capital expenditures. When we break the sample into the three categories, we find that frequent repurchasersexperiencegreatershort-runreturnsthaninfrequentandoccasionalrepurchasers.These results persist when we break the sample into different economic states. We attribute the short run returns to the frequent repurchaser to the potentially higher degrees of information asymmetry in such firms. Consistent with Comment and Jarrell (1991) , our result suggests that firms with higherdegrees of information asymmetry are likely to repurchase their shares to signal their value to the market when they believe their shares are undervalued.