Determinants of the Choice between Alternative Share Repurchase Methods

1997 ◽  
Vol 12 (2) ◽  
pp. 101-124 ◽  
Author(s):  
Nikos Vafeas
Keyword(s):  
Cash Flow ◽  
Free Cash Flow ◽  
Share Repurchase ◽  
Open Market ◽  
Empirical Examination ◽  
Tender Offer ◽  
Managerial Entrenchment ◽  
Inside Ownership ◽  
Information Signaling ◽  
Flow Information

This study provides an empirical examination of the determinants of the choice between alternative share repurchase methods. It is shown that the likelihood of selecting a self-tender offer over an open market share repurchase increases with the repurchasing firm's agency costs of free cash flow, inside ownership percentage, leverage, prebuyback stock performance, and the magnitude of cash involved in the transaction. The empirical evidence is consistent with the free cash flow, information-signaling, and managerial entrenchment hypotheses contributing toward explaining the choice of repurchase method among firms. The study concludes that the two repurchase methods appear to serve different purposes for the repurchasing firm.

The Announcement Effects of Restricted Open Market Share Repurchases: Experience from Taiwan

2004 ◽  
Vol 07 (03) ◽  
pp. 335-354 ◽  
Author(s):  
Miawjane Chen ◽  
Chao-Liang Chen ◽  
Wan-Hsiu Cheng
Keyword(s):  
Abnormal Returns ◽  
Free Cash Flow ◽  
Share Repurchase ◽  
Open Market ◽  
Announcement Effects ◽  
Significant Difference ◽  
Repurchase Announcements ◽  
Free Cash Flow Hypothesis ◽  
Managerial Choice ◽  
Signaling Hypothesis

In this paper we empirically examine the effects of 451 restricted share repurchase announcements in Taiwan. Their 3-day cumulative abnormal returns are all significantly positive for different purposes and Tobin's qs. However, there is no significant difference in abnormal returns for different repurchasing purposes. This indicates that mandating a purpose is not really an effective tool for limiting managerial choice. Moreover, when the related variables are controlled, the other empirical results we conducted indicate that, at least in Taiwan, the traditional signaling hypothesis and the free cash flow hypothesis can function simultaneously to explain the effects of the restricted repurchase announcements.

An Examination of the Free Cash Flow and Information/Signaling Hypotheses Using Unexpected Dividend Changes Inferred from Option and Stock Prices: The Case of Regular Dividend Increases

2011 ◽  
Vol 14 (03) ◽  
pp. 563-600 ◽  
Author(s):  
Sheng-Syan Chen ◽  
Kuei-Chin Fu
Keyword(s):  
Research And Development ◽  
Cash Flow ◽  
Stock Prices ◽  
Abnormal Returns ◽  
Positive Association ◽  
Free Cash Flow ◽  
High Q ◽  
Information Signaling ◽  
Dividend Increases ◽  
Free Cash Flow Hypothesis

This paper measures unexpected dividend changes in testing the free cash flow and information/signaling hypotheses using the Bar–Yosef/Sarig method. The empirical findings reveal the following: (i) The association between announcement period abnormal returns and the cash level is significantly positive for low q firms; (ii) The positive association between announcement period, abnormal returns, and the cash level is stronger in low q than in high q firms for most regressions; (iii) Low q firms reduce their capital and research and development (R&D) expenditures during the four fiscal years following dividend increase announcements. Our results are consistent with the free cash flow hypothesis.

scholarly journals SPREADSHEET ERROR DETECTION: AN EMPIRICAL EXAMINATION IN THE CONTEXT OF GREECE

2012 ◽  
Vol 10 (1) ◽  
pp. 128-143
Author(s):  
Dimitrios Maditinos ◽  
Dimitrios Chatzoudes ◽  
Charalampos Tsairidis
Keyword(s):  
Cash Flow ◽  
Error Detection ◽  
Flow Model ◽  
End Users ◽  
Free Cash Flow ◽  
Personal Computers ◽  
Empirical Examination ◽  
Spreadsheet Models ◽  
Of Greece

The personal computers era made advanced programming tasks available to end users. Spreadsheet models are one of the most widely used applications that can produce valuable results with minimal training and effort. However, errors contained in most spreadsheets may be catastrophic and difficult to detect. This study attempts to investigate the influence of experience and spreadsheet presentation on the error finding performance by end users. To reach the target of the study, 216 business and finance students participated in a task of finding errors in a simple free cash flow model. The findings of the study reveal that presentation of the spreadsheet is of major importance as far as the error finding performance is concerned, while experience does not seem to affect students on their performance. Further research proposals and limitations of the study are, moreover, discussed.

scholarly journals Investor protection, share repurchases, irrationality and agency conflicts: The implications for corporate governance

2006 ◽  
Vol 4 (1) ◽  
pp. 248-257
Author(s):  
Ganggang Zhang ◽  
Richard Fairchild
Keyword(s):  
Corporate Governance ◽  
Cash Flow ◽  
Free Cash Flow ◽  
Share Repurchase ◽  
Agency Conflicts ◽  
Flow Problems ◽  
First Case ◽  
Governance Systems ◽  
The Face ◽  
Behavioural Factors

This paper provides a theoretical analysis of the effects of the strength of investor rights on a firm’s share repurchase policy in the face of agency conflicts and behavioural biases. We consider three reasons for firms to repurchase their shares; to eliminate agency costs of free cash-flow, to time the market, and to cater to investors. In the first case, we demonstrate that investor rights and repurchases may be complements or substitutes in addressing free cash flow problems. In the second case, we argue that stronger investor rights increase informational disclosure which reduces the ability to time the market using repurchases. In the final case, we argue that stronger investor rights may reduce value reducing repurchase catering. We consider the corporate governance implications of our analysis, and discuss the effects of behavioural factors, such as bounded rationality, overconfidence, and regret, on the efficacy of governance systems to deal with the problems relating to repurchases

Voluntary Disclosure of Free Cash Flow Information

2006 ◽  
Vol 20 (4) ◽  
pp. 311-332 ◽  
Author(s):  
Ajay Adhikari ◽  
Augustine Duru
Keyword(s):  
Firm Performance ◽  
Empirical Evidence ◽  
Cash Flow ◽  
Voluntary Disclosure ◽  
Credit Ratings ◽  
Financial Statements ◽  
Free Cash Flow ◽  
Reporting Practices ◽  
Flow Information ◽  
Number Of Firms

Modern finance texts have long advocated a focus on “free cash flow” rather than on earnings for evaluating firm performance. While U.S. GAAP does not require firms to disclose free cash flow (FCF) information, some firms voluntarily report and emphasize FCF in their financial statements. FCFs are discussed and used in some finance texts, analysts' reports, and financial press articles, yet little theoretical and conceptual guidance exists on how to compute FCF. Hence, the SEC and the FASB have expressed concern about the comparability, consistency, and transparency of these reported measures. This study provides empirical evidence on a set of firms that voluntarily disclose FCF information in their 10-K and 10-Q reports filed between 1994 and 2004. The number of firms disclosing FCF information is small but has grown in recent years. We document that FCF definitions vary widely, limiting comparability of FCF disclosures across firms. Our results also indicate that FCF firms are less profitable and more leveraged than other firms in their own industries. Moreover, FCF firms have lower credit ratings and pay out higher dividends. These results suggest that FCF firms provide FCF disclosures to augment reported income and cash flow information. As such, our results suggest that FCF firms view FCF disclosures as an important complement to their traditional reporting practices.

Dividend Payout Ratio: Persoalan Free Cashflow, Debt To Equity Ratio, Kepemilikan Institutional, Investment Opportunity, Dan Kesejahteraan Karyawan

Liquidity ◽  
2017 ◽  
Vol 6 (1) ◽  
pp. 1-11
Author(s):  
Nurlis Azhar ◽  
Helmi Chaidir
Keyword(s):  
Cash Flow ◽  
Significant Influence ◽  
Stock Exchange ◽  
Institutional Ownership ◽  
Free Cash Flow ◽  
Manufacturing Companies ◽  
Flow Ratio ◽  
Prediction Ability ◽  
Employee Welfare ◽  
Equity Ratio

This study was conducted to examine the effect of Free Cash Flow Ratio, Debt Equity Ratio (DER), Institutional Ownership, Employee Welfare and Price Earning Ratio (PER) to Divident Payout Ratio (Parliament) partially on manufacturing companies listed on Indonesia Stock Exchange period 2011-2015. In addition, to test the feasibility of regression model, the influence of Free Cash Flow Ratio, Debt Equity Ratio (DER), Institutional Ownership, Employee Welfare and Price Earning Ratio (PER) to Divident Payout Ratio (DPR) simultaneously at manufacturing company listed on Bursa Indonesia Securities period 2011-2015. The population in this study are 146 manufacturing companies that have been and still listed in Indonesia Stock Exchange period 2011-2013. The sampling technique used was purposive sampling and obtained sample of 42 companies. Data analysis technique used is by using multiple linear regression test. The results showed that Free Cash Flow Ratio, no significant effect on Divident Payout Ratio (DPR). Debt Equity Ratio (DER) has a negative and significant influence on Divident Payout Ratio (DPR), Institutional Ownership has a significant positive effect on Divident Payout Ratio (DPR), Employee Welfare and Price Earning Ratio (PER) has a positive and significant influence on the Divident Payout Ratio ). Simultaneously Free Cash Flow Ratio, Debt Equity Ratio (DER), Institutional Ownership, Employee Welfare and Price Earning Ratio (PER) give effect to Divident Payout Ratio. The prediction ability of the five variables to the Divident Payout Ratio (DPR) is 21.3% as indicated by the adjusted R square of 0.271 while the remaining 79.7% is influenced by other factors not included in the research model.

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