Stock Repurchases and Cash Acquisitions - A Payout Policy Perspective

AbstractThis paper investigates whether corporate payout policy is associated with insiders' share holdings and their tax preferences. We find that insider ownership and the implied tax liabilities are positively related to a firm's propensity to employ share repurchases. Firms with higher levels of or greater increases in insider ownership prefer stock repurchases to cash dividends. This relation is more significant in years when dividends were more tax disadvantaged relative to capital gains. Our findings are robust to the endogeneity of insider ownership and the inclusion of various control variables such as firm size, permanence of cash flows, growth opportunities, institutional ownership, and executive stock options. Overall, our results suggest that personal tax considerations from insiders affect corporate payout decisions.

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Accounting Disclosures and Corporate Payout Policy: Special Dividends versus Stock Repurchases

Journal of Accounting Auditing & Finance ◽

10.1177/0148558x9901400401 ◽

1999 ◽

Vol 14 (4) ◽

pp. 385-399 ◽

Cited By ~ 4

Author(s):

David Gelb

Keyword(s):

Payout Policy ◽

Stock Repurchases ◽

Accounting Disclosures

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Stock Repurchases: A Theoretical Prediction Model

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v9i3.4132 ◽

2011 ◽

Vol 9 (3) ◽

Author(s):

Craig Santicola

Keyword(s):

Theoretical Prediction ◽

Prediction Model ◽

Payout Policy ◽

Stock Repurchases ◽

Estimation Model ◽

Stock Repurchase ◽

Long Run ◽

History Of ◽

Repurchase Programs

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.

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