Repurchase Activity Research Articles

Stock Repurchases and Executive Compensation Contract Design: The Role of Earnings per Share Performance Conditions

ABSTRACT: We examine the link between firms’ stock repurchase activity and the presence of earnings per share (EPS) performance conditions in executive compensation contracts. Findings reveal a strong positive association between repurchases and EPS-contingent compensation arrangements. Further analysis suggests net benefits to shareholders from this association. Specifically, repurchasers experience larger increases in total payouts; the positive association between repurchases and cash performance is more pronounced for firms with EPS targets in the presence of surplus cash; undervalued firms with EPS targets are more likely to signal mispricing through a repurchase; and repurchasers with EPS conditions are associated with lower abnormal accruals. We find no evidence that EPS-driven repurchases impose costs on shareholders in the form of investment myopia.

스포츠이벤트 참여결정요인이 만족도 및 행동의도에 미치는 영향

The purpose of this study was to investigate the effect of sports event on satisfactions and behavior intension. This study set the spectator who participated to a 56th Gyeonggido sports festival its survey targets and selected 476 copies questionnaires as its final valid samples. According to SPSSWIN ver. 15.0, we executed the exploratory factor analysis, reliability analysis and multiple regression. we obtained the following results: First, facility satisfaction of consumer satisfaction influences a benefit, service satisfaction influence a benefit, traffic and service, benefit satisfaction influence a benefit, image, image satisfaction influence a benefit, cost and image, finally traffic satisfaction influence a benefit, traffic and service by the relationship between the effect of sports events participating determinants and consumer satisfaction. Second, repurchase intention of repurchase behavior influences a cost, image and service, recommendation intention influence a facility, cost, image and service by the relationship between the effect of sports events participating determinants and repurchase activity.

Do Firms Buy Their Stock at Bargain Prices? Evidence from Actual Stock Repurchase Disclosures

Using new monthly data we investigate open-market repurchase executions of US firms. We find that firms repurchase at prices which are significantly lower than average market prices. This price discount is negatively related to size and positively related to market-to-book ratio. Firms’ repurchase activity is followed by a positive and significant abnormal return. Importantly, the market response occurs when firms disclose their actual repurchase data in earnings announcements, and this positive response is followed by a one month drift. Consistent with these results, we find that insider trading is positively related to actual repurchases.

Does Better Corporate Governance Lend Credibility to Open-Market Share Repurchase Announcements?

I examine the role of corporate governance in explaining the wealth effect of firms’ announcing open-market share repurchases and managerial actual buyback decisions subsequent to the announcements. Using exploratory principal component analysis, I identify five factors to proxy corporate governance: centralization, supervision, business risk, objectivity, and dependency. I further construct a governance index for Taiwan to obtain a comprehensive effect from a corporate governance mechanism. I find that the capital market reaction to share repurchases announced for the purpose of signaling undervaluation is more favorable among those firms with better corporate governance. However, the actual share repurchase decision of management subsequent to repurchase announcements is independent of the firms’ extent of corporate governance. My results suggest that small size, the Big 4 accounting firms auditing and high listing requirements are determinants of actual buyback shares while management executes repurchase programs. In addition, the required pre-set execution price range before a repurchase announcement explains part of the completion of repurchase programs. This study supports the notion that a better corporate governance mechanism lends credibility to firms’ open-market share repurchase announcements and is noteworthy in assessing the wealth effect of open-market share repurchase announcements on shareholders’ value.

Stock Repurchases and TARP in the Financial Industry

In this paper, we examine the relation between the inadequate levels of capital during the recent financial crisis and the shareholder dividend and stock repurchase activities in the banking industry. In 2008, the Treasury Department initiated a bailout of the banking industry through the Troubled Asset Relief Program (TARP). Over the years leading up to this bailout, 2004-2007, shareholder payout activity increased dramatically. We first explore the efficient capital market motivations for the share repurchases of our sample of banking firms. Consistent with studies in the non-financial industry we find some support for the excess cash, undervaluation, and stock compensation hypotheses. However, we observe a structural shift in the model in 2007 that is inconsistent with efficient capital market behavior. Next, we explore the relation between firms that accepted funds from the Capital Purchase Program (CPP), the largest program within TARP, and the increasing levels of shareholder payouts. We find that firms that accepted CPP funds returned a higher proportion of their available capital to shareholders in the periods leading up to the financial crisis than firms that did not accept CPP funding. Finally, we document the improvement in for the capital adequacy of the CPP participant firms, and we provide anecdotal evidence on the impact of CPP on the largest four participating banks.

Open Market Share Repurchases: What the Actual Trades Tell us Regarding the Completion Rates and Risk

This paper investigates the announcement of intention to repurchase shares in the open market and the respective actual repurchase trades. We find that firms repurchase on average 74% of the intended amount of shares. In addition, size, leverage and dividend yield have a positive relationship with the completion rate of repurchase programme, contrary to the initiation lag and ownership concentration which have a negative relationship. We document that repurchasing firms experience a significant decline in systematic risk when the repurchase trades are executed, not when announcing the intention to repurchase. Finally, Fama-French regressions and the decomposition of firms’ total risk in systematic and idiosyncratic risk confirms our findings on risk changes.

Stock Repurchases, Stock Options, and Earnings Management: An Empirical Analysis of US Firms

This paper examines the relationship between open market repurchases, stock options, and earnings management. Using a sample of firms in the S&P 500, S&P Midcap 400 and S&P Smallcap 600 indices during 1998-2004, we find that, after controlling for the traditional motives, managerial stock options affect positively the magnitude of actual repurchases. In addition, while both managerial options exercisable and unexercisable have a positive effect on actual repurchases, exercisable options have a larger effect than unexercisable options. We also find managers use stock repurchases as a substitute device for discretionary accounting accruals in their earnings management behavior. The evidence further shows that managerial stock options, especially managerial options exercisable, are positively associated with the magnitude of earnings management.

Changing perspectives on distribution policy

PurposeThe purpose of this paper is to provide a synthesis of the literature on the changing perspectives of corporate distribution policy.Design/methodology/approachThis paper synthesizes and interprets the theoretical, empirical and survey‐based research on corporate payout policy.FindingsDividends once constituted a prominent part of an investor's total return, but this role has declined over time. Although many companies still pay cash dividends, share repurchases have risen dramatically and are now a significant component of payout.Research limitations/implicationsNew theories and perspectives on corporate distribution are likely to be introduced; while this paper represents an up‐to‐date view on the topic, it is not possible to anticipate new research developments that may affect some of the perspectives expressed herein.Practical implicationsNo single explanation fully accounts for the changes in distribution policy, most notably, the declining incidence of dividend‐paying firms and the increasing level of repurchase activity. Factors that explain the popularity of share repurchases in the USA include the improved regulatory environment, economic conditions, and the flexibility of repurchases relative to dividends. Developing a comprehensive model that explains the choice between dividends and share repurchase remains a challenge facing researchers.Originality/valueThe paper adds to the body of knowledge by providing an integrated perspective on dividends and share repurchase, summarizing decades of theoretical, empirical, and survey‐based research.

Niches at the edges: price‐value tradeoff, consumer behavior, and marketing strategy

PurposeThe purpose of this paper is to examine how the perception of price‐value tradeoff is related to overall satisfaction, purchase intention, word‐of‐mouth advertising, and actual repurchase behavior.Design/methodology/approachData on subscribers and single ticket buyers of a major symphony orchestra in the Midwest are used to test the hypotheses.FindingsThe ANOVA results show significant differences across the three levels of price‐value tradeoff in each of the response variables. Additional analyses of cross‐tabulated data show that some of the bivariate relations conform to, as well as depart from, the rational consumer behavior model.Research limitations/implicationsAlthough the hypotheses are supported, bivariate relations examined in this study can mask or overstate true relations due to the omitted variables bias. Future research can explore reasons for favorable behaviors of consumers whose perception is that the value they receive is overpriced, and also for unfavorable behaviors of consumers whose perception is that the value they received is under‐priced.Practical implicationsThe different niches at the edges provide opportunities for marketers to fine‐tune segmentation and marketing mix strategies. The use of standardized strategies for these niches with different perception and behavior linkages will yield suboptimal results.Originality/valueWhile previous research has mostly focused on price‐quality linkages, this study extends the body of research by examining the perception of price‐value tradeoff and its relation to overall satisfaction, purchase intention, word‐of‐mouth advertising, and actual repurchase behavior. This adds to our understanding of post consumption behavior, showing how consumers respond to the perception of price‐value tradeoff.

프로야구 관람요인 특성과 만족 및 재구매행동의 관계

프로야구 관람요인 특성과 만족 및 재구매행동의 관계

Service quality and customer retention in mobile telephony

The aim of this paper is to identify the influence of service quality on customer loyalty in the Greek mobile telephony sector. Service quality was measured using the SERVPERF model. Repurchase intention and positive word of mouth were used as behavioural components to measure customer loyalty; however, it should be noted that customers' stated repurchase intention does not always ensure their actual repurchase behaviour. The influence of perceived price on customers' repurchase intention was also examined. Data were collected through survey research, and 180 mobile telephony users were personally interviewed. The findings showed that there are relationships between service quality and customers' repurchase intention in mobile telephony.

Customer Retention in the Greek Internet Market

No accessInternational Journal of e-Business ManagementOther Journal Article01 May 2009Customer Retention in the Greek Internet Market SectionsAboutPDF/EPUBExport CitationsAdd to FavouriteAdd to FavouriteCreate a New ListNameCancelCreate ToolsTrack CitationsCreate Clip ShareFacebookTwitterLinkedIn COPY LINK Abstract The aim of this article is to identify the influence of service quality and perceived price on customer retention in the Greek Internet market. Service quality is measured using the SERVQUAL model. Two proxies are used to measure customer loyalty, repurchase intention and positive word of mouth. However, it should be noted that customers stated repurchase intention does not always ensure their actual repurchase behaviour. Data were collected through a survey and 140 Internet users were personally interviewed. The findings showed that there are relationships between service quality, perceived price and customers' intention to repurchase and engage in positive word of mouth. Full Text DOI Previous article Next article RelatedDetails View PUBLICATION DETAILSDate of Publication:May 2009Journal:International Journal of e-Business ManagementISSN:1835-5412Volume:3Issue:1Page Range:[35]-48First Page:35Last Page:48Source:International Journal of e-Business Management, Vol. 3, No. 1, May 2009: [35]-48Date Last Modified:13 June 2019 16:18Date Last Revised:21 September 2010SubjectInternet service providersCustomer loyaltyCustomer relations--Management METRICS Downloaded 0 times Copyright© RMIT Publishing, 2009Download PDFLoading ...

An empirical survey of the motivation for share repurchases in the UK

PurposeMost research on share repurchases is based on the USA. Recently, the rate of share repurchases by UK companies has increased significantly; such a marked increase in activity would suggest a change in strategic factors generating this activity. This paper aims to focus on UK practice, the motivations of UK companies to repurchase shares and compares similar research in the USA.Design/methodology/approachStrategic motives for share repurchase activity are examined by a questionnaire survey of the finance directors of the top UK 200 companies. The outcome is compared to equivalent US research. The theoretical underpinning of the survey is based on six prominent hypotheses from the academic literature.FindingsThe results indicate that a primary motive of share repurchases in the UK is to achieve an optimal capital structure, and that the requirement to cancel shares is fundamental to buy‐back decisions in the UK.Research limitations/implicationsUSA/UK comparison has limitations, nevertheless it highlights differences and possible reasons. A follow‐up study in the current market conditions may give further clarity. Also, a survey of smaller quoted companies may further enhance our understanding of the motives.Practical implicationsThe likelihood is of this trend being maintained, especially in view of legal development.Originality/valueIndividual respondents indicated that finance directors have a genuine interest in this topic and that further research would be beneficial in both practical and academic use. Share buy‐backs can be an effective part of the overall strategy of a company, however the effects of a repurchase are ultimately short term.

The Market Liquidity Impact of Open Market Share Repurchases

We examine the market liquidity impact of open market share repurchases in a computerized order driven market. Using a detailed dataset of daily repurchase transactions on the Stockholm Stock Exchange together with intraday data on bid-ask spreads and order depths enable us to examine liquidity effects on the actual repurchase days. Overall, we find that repurchase trades inside the order driven trading system contributes to market liquidity through narrower bid-ask spreads and deeper market depths. After controlling for total trading volume, price, and volatility we still find a significant decrease of the bid-ask spread on repurchase days relative to surrounding non-repurchase days. However, repurchases executed as block trades outside the order driven trading system have a detrimental effect on the bid-ask spread, consistent with a negative response to the presence of informed managerial trading.

The Effect of Enhanced Disclosure on Open Market Stock Repurchases

Publicly traded companies distribute cash to shareholders primarily in two ways - either through dividends or through anonymous repurchases of the companies' own stock on the open market. Companies must announce a repurchase authorization, but do not actually have to repurchase any stock, and until recently did not have to disclose whether or not they were in fact repurchasing any stock. Scholars and regulators noticed that companies frequently announced repurchases but then appeared not to complete them. Scholars and regulators became concerned that such announcements might be used by insiders to exploit public investors. To increase transparency and reduce opportunities for exploitive behavior, the SEC required that companies disclose their repurchase activity for the past quarter in their 10-Q and 10-K filings beginning in January 2004. This paper tracks the 365 repurchase programs announced in 2004 and finds that since the SEC disclosure requirement went into effect, companies are more likely to complete their announced repurchases and do so within a shorter time period after the repurchase announcement.

The Role of Executive Stock Options in REIT Repurchases

This paper examines the relationship between managerial stock option holdings and the decision to announce a repurchase of the firm’s common stock. Managerial stock option holdings should reinforce the traditional undervaluation, free cash flow, and capital structure motives for repurchases by helping to align the objectives of management and shareholders. Data from the Real Estate Investment Trust (REIT) industry during the peak period of repurchase activity (1997-1999) are used to estimate a logit model of the decision to announce a repurchase program. After controlling for the standard motivations discussed in the literature, the findings reveal that managerial option holdings are positively related to the likelihood of a repurchase announcement.

Managerial Discretion and the Capital Structure Dynamics

This paper examines the effect of managerial discretion on capital structure dynamics. Analyses of financing decisions indicate that managers with more discretion prefer issuing equity over debt. Examination of leverage changes suggests that increases in debt ratios due to positive and negative financial deficits are greater for managers with high discretion. Furthermore, when managers have high‐ discretion, debt changes seem to be more sensitive to issuance activities than to repurchase activities. For high‐discretion managers, market timing activities (equity issuance following increases in stock prices) and the passive response to stock price appreciations, result in greater declines in debt ratios. Finally, while firms tend to rebalance their capital structures over time regardless of the level of managerial discretion, the speed of target adjustment is much slower for high‐discretion managers.

The Takeover Deterrent Effect of Open Market Share Repurchases

ABSTRACTThis paper examines whether open market share repurchases deter takeovers. We model pre‐repurchase takeover probability as a latent variable and examine its impact on the firm's decision to repurchase shares. Given specification tests reject the Tobit model, we turn to the censored quantile regression method of Powell (1986, Journal of Econometrics 32, 143–155). We find a significantly positive relation between open market share repurchases and takeover probability, and we reconcile empirical findings in previous studies that contradict predictions. Repurchase activity is inversely related to firm size, consistent with smaller firms having greater information asymmetry, and is related to temporary, but not permanent, cash flows.

Estimating the Ex Ante Equity Premium

We find that the true ex ante equity premium very likely lies within 50 basis points of 3.5%. This estimate is similar to values obtained in some recent studies but is considerably more precise. In addition to narrowing the range of plausible ex ante equity premia, we also find that equity premium models that allow for time-variation, breaks, and/or trends are the models that best match the experience of US markets and are the only models not rejected by our specification tests. This suggests that time-variation, breaks, and/or trends are critical features of the equity premium process. Our approach involves simulating the distribution from which interest rates, dividend growth rates, and equity premia are drawn and determining the prices and returns consistent with these distributions. We achieve the narrower range of ex ante equity premium values and the narrower set of plausible models by comparing statistics that arise from our simulations with key financial characteristics of the US economy, including the mean dividend yield, return volatility, and mean return. Our findings are achieved in part with the imposition of more structure than is typically exploited in the literature. In order to mitigate the potential for misspecification with this additional structure, we consider a broad collection of models that variously do or do not incorporate features such as an adjustment in dividend growth rates to account for recently increased share repurchase activity, sampling uncertainty in generating model parameters, and cross-correlation between interest rates, dividend growth rates, and equity premia.

The Role of Executive Stock Options in REIT Repurchases

This paper examines the relationship between managerial stock option holdings and the decision to announce a repurchase of the firm's common stock. Managerial stock option holdings should reinforce the traditional undervaluation, free cash flow, and capital structure motives for repurchases by helping to align the objectives of management and shareholders. Data from the REIT industry during the peak period of repurchase activity (1997-1999) are used to estimate a logit model of the decision to announce a repurchase program. After controlling for the standard motivations discussed in the literature, the findings reveal that managerial option holdings are positively related to the likelihood of a repurchase announcement.