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Off‐Market Buybacks in A ustralia: Evidence of Abnormal Trading around Key Dates
Author(s) -
Au Yong Hue Hwa,
Brown Christine,
Ho Chloe Choy Yeing
Publication year - 2014
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/irfi.12037
Subject(s) - dividend , monetary economics , business , finance , economics
Off‐market share buybacks in A ustralia are often structured with the buyback price comprising a large dividend component (which may carry imputation tax credits) and a small capital component. This unique structure has the consequence that institutions on low tax rates stand to benefit most from selling shares into the buyback. In this article, we explore evidence of abnormal trading activities around key dates in the conduct of off‐market buybacks and investigate the drivers of these activities. We find evidence of abnormal trading activities around the initial announcement and the final announcement dates of the buyback. The significant differences in abnormal volumes between the buybacks with and without imputation tax credits highlight the importance of tax motivations in explaining abnormal trading activities in the shares of companies conducting off‐market buybacks, and are consistent with observed buying pressure around the announcement of the buyback.