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Open-market block share repurchases probability, frequency and timing

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  • Chen, Ni-Yun
  • Liu, Chi-Chun

Abstract

We benefit from the unique disclosure regulations in Taiwan and investigate the influence of firm characteristics on open-market block share repurchases. We find that smaller firms with a higher leverage are more likely to execute block share repurchases reaching the share quantity criterion and tend to do so more frequently than all other firms, supporting the signaling hypothesis. By contrast, larger firms with a lower leverage prefer block share repurchases reaching the share value criterion, supporting the leverage hypothesis. We further examine the magnitude of actual share repurchases in our sensitivity analysis. We find that smaller firms with a higher leverage are positively associated with the number of shares actually repurchased expressed as a percentage of outstanding shares while larger firms with a smaller leverage ratio are positively associated with the value of shares actually repurchased. Moreover, both kinds of firms tend to execute block share repurchases early but firms suffering undervaluation more persevere regardless of the rising costs.

Suggested Citation

  • Chen, Ni-Yun & Liu, Chi-Chun, 2019. "Open-market block share repurchases probability, frequency and timing," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 278-296.
    • Handle: RePEc:eee:pacfin:v:53:y:2019:i:c:p:278-296
    DOI: 10.1016/j.pacfin.2018.11.005
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    Cited by:

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    2. Tsai, Pei-Ling & Hsu, Yuan-Lin & Chih, Hsiang-Hsuan & Lin, Shih-Kuei, 2022. "Theoretical and empirical analysis of options in open market share repurchases of Taiwan companies," International Review of Economics & Finance, Elsevier, vol. 81(C), pages 205-226.
    3. Natalya Zelenyuk & Robert Faff & Shams Pathan, 2020. "Size‐conditioned mandatory capital adequacy disclosure and bank intermediation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(4), pages 4387-4417, December.
    4. Ni‐Yun Chen & Chi‐Chun Liu, 2021. "Share repurchases and market signaling: Evidence from earnings management," International Review of Finance, International Review of Finance Ltd., vol. 21(4), pages 1203-1224, December.

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    More about this item

    Keywords

    Block share repurchases; Signaling hypothesis; Leverage hypothesis; Undervaluation;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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