Repurchase Decisions Research Articles

The Debt-Equity Choice

When firms adjust their capital structures, they tend to move toward a target debt ratio that is consistent with theories based on tradeoffs between the costs and benefits of debt. In contrast to previous empirical work, out tests explicitly account for the fact that firms may face impediments to movements toward their target ratio, and that the target ratio may change over time as the firm's profitability and stock price change. A separate analysis of the size of the issue and repurchase transactions suggests that the deviation between the actual and the target ratios plays a more important role in the repurchase decision than in the issuance decision.

An empirical validation of a loyalty model based on expectation disconfirmation

Investigates the concept of maker loyalty as it applies to the automobile market in Korea. The study has three major objectives: first, it examines the effects of expectation disconfirmation on loyalty behavior and on overall satisfaction; second, it seeks to identify the four types of maker loyalty by means of interaction between expectation disconfirmation and the repeat purchase (or switching); and third, it seeks to identify the effects of moderating variables such as situational variables and normative variables on loyalty behavior. It was found that negatively disconfirmed expectation exerts greater impact on overall satisfaction as well as repurchase decision than positively disconfirmed expectation. The four maker loyalty groups (loyals, latent loyals, spurious loyals, no loyals) identified in this study were shown to have different reactions to the moderating variables. Managerial implications regarding customer segmentation based on loyalty are offered.

The effects of survey timing on perceptions of service quality

Disconfirmation models of service quality have attracted a lot of discussion about how consumers’ expectations are formed, but relatively little about the nature of their perceptions of service performance. This paper seeks to redress the absence of literature on the psychological underpinnings of perceptions in disconfirmation models of service quality. It argues that an individual’s perceptions may not be stable over time and that suppliers should be particularly interested in consumers’ perceptions at the time that the next repurchase decision is made. A model of the time elapsed effects of service quality perception is presented and research reported on a longitudinal survey of hotel customers’ perceptions.

When Is Advertising a Signal of Product Quality?

A model of advertising is presented in which consumption experience is an imperfect indicator of product quality. In equilibrium, neither price nor advertising signal the quality of newly introduced goods. Advertising of established products can be a signal of quality, but if it is, it must be an imperfect signal leaving residual uncertainty that influences consumers’ repurchase decision. A set of observable implications follow.

Coupon characteristics and brand choice

AbstractThe effects of coupons on brand choice and repurchase behavior were examined in a laboratory panel experiment. Each of the 122 consumers purchased a candy bar on 10 different occasions; on the seventh purchase occasion, each consumer received an announcement of a new candy bar and one of four versions of a coupon. Results showed that whether or not a consumer will use a coupon depends on the size of the coupon offer, how easily the consumer can redeem the offer, how brand loyal the consumer is, and whether or not the consumer is deal prone. We also found, after statistically adjusting for our censored sample, that loyalty and coupon Characteristics influence whether or not a consumer will continue to purchase a formerly discounted brand. Information aggregation theory (Tybout & Scott, 1983) explains better than attribution theory how the coupon affects repurchase decisions.

Factors affecting consumer purchase decision for round white potatoes

Potatoes are typically marketed by type, such as Russet or Round White, rather than by variety. However, sensory tests have shown that varieties with similar outward appearance have distinguishable internal and cooking characteristics. This study summarizes tests of consumer ability to differentiate visually similar round white potato varieties based on the performance of the potatoes in home use and examines how consumer satisfaction, purchasing habits and demographic variables influence the repurchase decision.

Goodwill, Intertemporal Price Dependence and the Repurchase Decision

Stigler's (i96i) pioneering article on the economics of information directed economists' attention to market situations where the classical assumption of perfect knowledge could not be supported. His theory pictured a world in which prices were not known to the consumer a priori. Information, being scarce, was also costly. But information had clear economic value to those wishing to possess it. Focus of the new theory thus came to be on an individual optimising over benefits (expected price reductions) and costs (time spent canvassing) to the activity of information gathering or 'search '.' Whilst this new direction taken by consumer theory has been towards greater descriptive realism, the attendant drawbacks have been several. Technical complexities of formulation have commonly resulted in highly simplified models with utility linear in prices, and purchase restricted to a single unit of the good. Even when time has been explicitly taken into account, an invariable assumption has been the independence of prices from one period to the next.2 After twenty years, Stigler still remains alone in the literature as having made an attempt to integrate the idea of intertemporally correlated prices with the important economic concept of goodwill. The present paper is an attempt to remedy within the context of a single model the above-mentioned deficiencies. The main emphasis of the paper, as the title suggests, is on the role of goodwill and intertemporal price dependence in the repurchase decision- the decision whether or not to buy again at the same store or to 'look around'. The framework proposed is a dynamic one in which the consumer has in each period to a finite horizon an ex post and ex ante utility maximisation problem. The ex post problem concerns her consumption decision in any period once prices are known; the ex ante problem her decision as to how much

Corporate Stock Issue and Repurchase

T e Spring and Autumn, 1974 issues of Financial Management carried articles [1, 4] dealing with share repurchase. Apparently there exists considerable disagreement as to both why firms repurchase their stock and the empirical methodology appropriate in evaluating share repurchase practices. Corporations have offered many reasons for issuing [7] and acquiring [3, 9] their own common stock. The reasons most often cited for a new issue are to reduce the risk associated with a highly levered firm, raise more capital for profitable investments, and take advantage of expectational differences as to price between the market and management. Major reasons suggested for repurchase are the tax advantage associated with such distributions versus dividends, the increase in leverage to increase return, and the market's underevaluation of the company's stock. All direct changes caused by the decision of management to increase or reduce the outstanding equity capitalization of the firm are explicitly considered in this study. Management has 3 alternatives. It can issue new stock, either directly or indirectly (warrants, convertibles, etc.); buy back already outstanding stock through open market purchases or tender offers; or, finally, do nothing. Only the first two alternatives are considered in this st dy. Other numerous studies include those by Ellis and Young [2] on the repurchase decision and Robichek and Myers [7] on the choice between debt and equity. The primary purpose here is to identify the characteristics of firms engaged in stock issue or repurchase activity.