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Management choice of buyback method: Australian evidence
Author(s) -
Brown Christine,
Norman Daniel
Publication year - 2010
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.2010.00349.x
Subject(s) - shareholder , business , share repurchase , database transaction , cash , finance , monetary economics , economics , corporate governance , computer science , programming language
This study investigates management choice of repurchase method for large Australian industrial companies from 1997 to 2007. We show that managers favour off‐market buybacks to distribute excess franking credits to shareholders when the buyback is larger and when the firm is generating more cash. On‐market buybacks are more likely when the firm is undervalued. These findings have implications for understanding how corporate managers approach the repurchase decision, the impact of taxes on corporate financial policy, and how transaction costs can influence the choice between an off‐market and an on‐market buyback.