To read the full version of this content please select one of the options below:

Do firms have a tax incentive for stock buybacks? An empirical examination

Advances in Taxation

ISBN: 978-0-76230-889-7, eISBN: 978-1-84950-158-3

ISSN: 1058-7497

Publication date: 1 July 2002

Abstract

This study examines whether there is a tax incentive for firms to engage in stock buybacks. Using methods previously established by Manzon (1994) and Scholes and Wolfson (1989), the results show that firms with high marginal tax rates are more likely to announce stock buybacks than firms with low marginal tax rates. Additionally, firms that announce stock buybacks have lower debt-equity ratios than firms that do not announce buybacks. Tax considerations do not appear to be a factor in the acquisition technique used, open market or tender offer. However, the tax motive and limited investment alternatives appear to be the major explanatory variables in the stock buyback decision.

Citation

Guffey, D.M., Schisler, D.L. and Schneider, D.K. (2002), "Do firms have a tax incentive for stock buybacks? An empirical examination", Advances in Taxation (Advances in Taxation, Vol. 14), Emerald Group Publishing Limited, Bingley, pp. 117-136. https://doi.org/10.1016/S1058-7497(02)14008-7

Publisher

:

Emerald Group Publishing Limited

Copyright © 2002, Emerald Group Publishing Limited