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Management choice of buyback method: Australian evidence

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  • Christine Brown
  • Daniel Norman

Abstract

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.

Suggested Citation

  • Christine Brown & Daniel Norman, 2010. "Management choice of buyback method: Australian evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(4), pages 767-782, December.
    • Handle: RePEc:bla:acctfi:v:50:y:2010:i:4:p:767-782
    DOI: 10.1111/j.1467-629X.2010.00349.x
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    References listed on IDEAS

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    Cited by:

    1. Hussein Abedi Shamsabadi & Byung-Seong Min & Richard Chung, 2016. "Corporate governance and dividend strategy: lessons from Australia," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 12(5), pages 583-610, October.
    2. Hussein Abedi Shamsabadi & Byung S. Min & Imen Tebourbi & Mohammad Nourani, 2020. "Corporate Governance in Australia: Share Repurchases under an Imputation Tax System," Capital Markets Review, Malaysian Finance Association, vol. 28(1), pages 1-23.
    3. Christian Andres & André Betzer & Markus Doumet & Erik Theissen, 2018. "Open Market Share Repurchases in Germany: A Conditional Event Study Approach," Abacus, Accounting Foundation, University of Sydney, vol. 54(4), pages 417-444, December.
    4. Christine Brown & John Handley & James O'Day, 2015. "The Dividend Substitution Hypothesis: Australian Evidence," Abacus, Accounting Foundation, University of Sydney, vol. 51(1), pages 37-62, March.
    5. Damien Cannavan & Stephen Gray & Jason Hall, 2023. "Sampling error and the joint estimation of imputation credit value and cash dividend value," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1029-1068, April.
    6. Hue Hwa Au Yong & Christine Brown & Chloe Choy Yeing Ho, 2014. "Off-Market Buybacks in Australia: Evidence of Abnormal Trading around Key Dates," International Review of Finance, International Review of Finance Ltd., vol. 14(4), pages 551-585, December.
    7. Ota, Koji & Lau, David, 2021. "Share repurchases on the Tokyo Stock Exchange Trading Network," Journal of the Japanese and International Economies, Elsevier, vol. 61(C).

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