The Determinants of Share Repurchases in Europe - with author details (original) (raw)
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The determinants of share repurchases in Europe
International Review of Financial Analysis, 2013
In this paper, we assess which firm-characteristics are associated with a firm's decision to announce a share repurchase programme in a cross-country framework.
An empirical analysis of European stock repurchases
Journal of Multinational Financial Management, 2010
In this paper, we examine the share price effects and determinants of share repurchase programs for French, German, Italian, and British firms. Like US firms, we find that German and Italian share repurchases are met with a positive and significant share price response. However, British repurchase announcements exhibit small positive abnormal returns, and abnormal returns for French share repurchases are insignificantly different from zero, both results being quite different from results found in studies of US firms. We also investigate the determinants of the size of the share repurchase program.
The Market Valuation of Share Repurchases in Europe
Journal of Banking & Finance, 2014
We analyze a uniquely constructed data set of open market share repurchases across a sample of European firms. We find that the announcement date market reaction is lower than that in the US, mainly because of (i) the relatively large number of recurring announcements which generate significantly lower returns than the initial announcements of intention to repurchase shares; (ii) the rather low market reaction in France, due probably to specific governance and corporate cultural issues; and (iii) the regulatory reform that allowed UK firms to keep the repurchased shares as treasury stock, which decreased their market impact. Across our countries, taxation, shareholder protection, and the European Union's Market Abuse Directive do not affect significantly the market valuation of repurchases. Our results imply that, ultimately, domestic institutional specificities and reforms play significant roles in the market valuation and popularity of share repurchases.
The market valuation of share repurchases in Europe q
We analyze a uniquely constructed data set of open market share repurchases across a sample of European firms. We find that the announcement date market reaction is lower than that in the US, mainly because of (i) the relatively large number of recurring announcements which generate significantly lower returns than the initial announcements of intention to repurchase shares; (ii) the rather low market reaction in France, due probably to specific governance and corporate cultural issues; and (iii) the regulatory reform that allowed UK firms to keep the repurchased shares as treasury stock, which decreased their market impact. Across our countries, taxation, shareholder protection, and the European Union's Market Abuse Directive do not affect significantly the market valuation of repurchases. Our results imply that ultimately, domestic institutional specificities and reforms play significant roles in the market valuation and popularity of share repurchases.
Open Market Share Repurchases in Europe: A Cross Country Analysis
2010
This thesis addresses the topic of open market share repurchases in Europe over the period 1997 to 2006. This thesis strives to document and clarify the managerial motives as well as the market perception and respective reaction to open market share repurchases, in a cross country framework. Therefore this thesis delves into the hypotheses that have been developed in the literature for interpreting these issues. The theories and hypotheses investigated in this thesis are mainly the information asymmetry and signalling for undervaluation, the tax hypothesis, the dividend substitution, the capital structure adjustment, and agency costs hypotheses under varying regulatory and institutional frameworks. Consistent with the U.S. evidence, share repurchases are popular in the U.K., but I find that the market does not have the same level of reaction as in the U.S. For Germany and France, share repurchase activity has been a more recent phenomenon, but not common. Nevertheless due to recent regulatory changes, this trend seems to be changing in favour of share repurchases. The empirical evidence in this thesis shows that market reaction to the announcement of intention to repurchase shares in the open market varies significantly among countries, and that the market becomes more accustomed to subsequent announcements made by the same firms. Furthermore, I find that ownership concentration, firm size, leverage, and in some cases past share price performance, have a significant impact on the market reaction, as well as on the managerial motives for announcing an open market share repurchase programme. Moreover, the evidence shows that not all the managerial motives and drivers of the market reaction have a uniform impact throughout the varying markets. Rather, it is only a number of firm characteristics that consistently influence the likelihood of an open market share repurchase in all three countries. Furthermore, I find that firms on average repurchase approximately three quarters of the shares targeted at the time of the announcement, suggesting that on average, firms repurchase a substantial portion but not the intended amount. In addition, I find that managers repurchase shares in order to provide price support. Finally, this thesis provides evidence that it is the actual trades and their respective reporting, and not the repurchase announcement itself that convey risk related information to the market. Therefore, the reporting of the actual repurchase trades sends positive signals to the market, which are reflected on the reduction of firms' systematic risk.
Why do Firms Repurchase Shares? Evidence from Actual Share Repurchases
In practice, the share repurchase announcement is not a commitment to managers. To this end, the large difference between the actual and announced share repurchases is often observed in markets. In this paper, we explore the implications from actual share repurchase activities, different from the existing methods which focus on the announcements of share repurchases and hence largely ignore the managers' actual repurchasing activities. By considering actual share repurchases and controlling variables, the new empirical evidence found in this paper clearly supports the agency and investor divergence of opinion hypotheses, but not for the information asymmetry hypothesis.
Can the Information Content of Share Repurchases Improve Out-of-Sample Predictive Performance?
Ssrn Electronic Journal, 2012
This paper examines whether out-of-sample predictive ability can be improved by adjusting the traditional dividend-price ratio for stock repurchases. We construct a measure of the total payout ratio which uses actual repurchase data derived from the UK and French financial markets. To facilitate a comparison with recent US studies which use proxies for repurchase activity, we also consider a second measure of the total payout ratio which is based on estimated repurchase data instead. Two major findings arise from our empirical analysis. Firstly, the total payout ratio, although a successful predictor of the equity premium in both markets, does not manage to produce better forecasts compared to the dividend-price ratio. Secondly, its proxy counterpart exhibits a variable performance across markets. Hence, our paper suggests that repurchase activity in the European financial markets may be independent of a firm's dividend policy and also, researchers should be cautious when employing estimated repurchase data in predictive regressions.
Review of Quantitative Finance and Accounting, 2014
This study uses logistic regression for the development of prediction models that distinguish between share-repurchasing and non-share repurchasing firms. The estimated models form the basis for an investment strategy, according to which one invests on the stock of the firms that are predicted as repurchasing ones. Using a sample of firms from the UK, France, and Germany, the results show that this strategy generates positive and statistically significant abnormal returns over different investment periods that range between 1 and 18 months.
Dividends and share repurchases in the European Union
Journal of Financial Economics, 2008
We examine cash dividends and share repurchases from 1989 to 2005 in the 15 nations that were members of the European Union before May 2004. As in the United States, the fraction of European firms paying dividends declines, while total real dividends paid increase and share repurchases surge. We also show that financial reporting frequency is associated with higher payout, and that privatized companies account for almost onequarter of total cash dividends and share repurchases. Our regression analyses indicate that increasing fractions of retained earnings to equity do not increase the likelihood of cash payouts, whereas company age does.
Stock Repurchases: A Theoretical Prediction Model
Journal of Business & Economics Research (JBER), 2011
There has been a shift in payout policy over the last 15 years with firms opting to conduct stock repurchases over paying dividends. As repurchases have grown so has the corresponding research. Of particular note are findings that identify factors contributing to a firms buyback decision and as well as those that support the existence of long-run return anomalies. While several notable researchers have reported the prevalence and persistence of stock repurchase anomalies, this paper examines the history of repurchase theory and presents a theoretical repurchase prediction model. Using variables shown in the literature to have influence on the decision to repurchase stock, a probit estimation model is developed as a means to identify firms likely to conduct repurchase programs.