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Article
Publication date: 31 December 2015

Nan Liu and Jamshid Mehran

The purpose of this paper is to investigate whether firms repurchase shares to meet or just beat their dividend target as managers perceive share repurchases are more…

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Abstract

Purpose

The purpose of this paper is to investigate whether firms repurchase shares to meet or just beat their dividend target as managers perceive share repurchases are more flexible than dividends and managers have a strong desire to maintain dividend levels and dividend payout ratio of the firms.

Design/methodology/approach

The authors first run a Tobit regression to examine whether firms meeting or just beating the quarterly dividend per share threshold exhibit unusually high repurchases, controlling for the factors shown to affect repurchases. The authors then calculate abnormal repurchases and compare firms that would otherwise miss the benchmark with other firms.

Findings

The authors find that firms meeting or just beating the quarterly dividend per share threshold repurchase more shares than other firms, after controlling for the substitution effect, investment opportunities and financial performance. In addition, firms otherwise missing the quarterly dividend per share threshold repurchase abnormally more shares to meet the threshold.

Originality/value

The study contributes to the payout policy literature in the following ways. First, it extends the understanding of the association between dividend payout and repurchase. Second, it contributes to the threshold literature by showing that firms manipulate repurchases in addition to earnings to meet their quarterly dividend per share threshold. Third, it provides support to the survey evidence that firms have a strong desire to maintain their dividend policies.

Details

Managerial Finance, vol. 42 no. 1
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 14 July 2022

Chanchal Chatterjee and Sweta Tiwari

This paper aims to analyze the stock price reaction because of dividend reduction (DR) announcements in the Indian equity market, controlling for share repurchases.

Abstract

Purpose

This paper aims to analyze the stock price reaction because of dividend reduction (DR) announcements in the Indian equity market, controlling for share repurchases.

Design/methodology/approach

The sample comprises National Stock Exchange (NSE) 500 companies listed in the NSE Ltd. covering a time span from year 2009 to 2019. Using the event study methodology, the authors measure the impact of DR announcements on security prices around the event day. The authors also examine the price response to DRs at the interim stage versus the final stage and identify the factors that drive the decision to reduce dividends at the interim level versus final level.

Findings

The authors find that overall DR announcements negatively impact abnormal returns. Firms that experience stronger adverse price reaction following DR announcements resort to share repurchase in the same year to boost stock prices. The authors find that interim DRs create more negative price reactions than final DRs. Finally, firms experiencing lower levels of prior year earnings, firms with smaller sizes and overvalued firms tend to reduce dividends at the interim level instead of postponing the reduction to the final level.

Originality/value

This paper examines stock price reaction because of DR announcements of Indian firms. The sample comprises firms that reduce dividends with contemporaneous share repurchases as well as firms that reduce dividends without contemporaneous repurchase activity. To the best of the authors’ knowledge, studies on substitution effect of dividends with buyback in the context of Indian equity market are rare. Further, investigating the difference in stock price movement because of DRs at the interim level versus the final level is the unique contribution of this paper.

Details

Journal of Indian Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1755-4195

Keywords

Article
Publication date: 11 July 2022

Bo Wang

Although the evidence exists for the effect of promotional frame on repurchase intention, it is unclear whether the timing of repurchase can moderate the effect. In this…

Abstract

Purpose

Although the evidence exists for the effect of promotional frame on repurchase intention, it is unclear whether the timing of repurchase can moderate the effect. In this paper, three experiments were conducted to answer this question.

Design/methodology/approach

In Experiment 1, a 2 (framing: bundle vs. gift) × 2 (repurchase target: focal vs. supplementary) × 2 (timing: short vs. long) between-subjects design was used. In Experiment 2, an identical design was used except that repurchase target being the within-subjects factor. In Experiment 3, the design was based on that of Experiment 2 and brand was added a between-subjects factor.

Findings

Experiment 1 showed that, with a short interval, repurchase intention under gift frame was higher than that under bundle frame. With a long interval, there was no significant difference between the gift and bundle frames. Experiment 2, however, indicated no effects for expensive products. Experiment 3 showed that brand (private versus national brand) moderate the interaction between framing, repurchase target and timing. Particularly, for private brand, no significant comparisons were found; for national brand, repurchase intention for the focal product was significantly higher than for the supplementary product, but only under the conditions of long interval and gift frame (rather than bundle frame).

Originality/value

Taken together, findings from the current study contributes to the literature by showing for the first time that repurchase timing can moderate the promotional frame effect (i.e. higher repurchase intention under gift framing relative to bundle framing occurs in the short interval but not long interval) and that brand type can moderate the joint effects of framing, timing and repurchase target (i.e. national brand, rather than private brand, paired with long interval and gift frame results in higher repurchase intention for the focal product). The findings provide marketers with important knowledge in terms of how to adjust a promotional frame depending on when consumers repurchase a product and whether the product has a private or national brand.

Details

Marketing Intelligence & Planning, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0263-4503

Keywords

Article
Publication date: 19 July 2022

Fong Jia Wang and Weisheng Chiu

This study examined the relationships between service encounter, perceived value, and repurchase intention in the fitness service sector through the theoretical lens of…

Abstract

Purpose

This study examined the relationships between service encounter, perceived value, and repurchase intention in the fitness service sector through the theoretical lens of service-dominant logic. In addition, the mediating role of perceived value and the moderating role of service innovativeness were examined.

Design/methodology/approach

Participants (n = 806) were drawn from fitness center customers in Taiwan using a convenience sampling technique. Partial least square structural equation modeling was used to test the hypotheses in the research model.

Findings

The results showed that service encounter had a positive impact on perceived value, which in turn affected repurchase intention. Moreover, the full mediating effect of perceived value was identified in the relationship between service encounter and repurchase intention. In addition, service innovativeness positively moderated the effect of service encounter on repurchase intention.

Originality/value

This study provides empirical evidence on the impact of staff-customer interactions (i.e. service encounter) on customers' perceptions and behaviors and identifies the critical role of perceived value as a mediating mechanism as well as a facilitating role of service innovativeness in enhancing repurchase intention.

Details

International Journal of Sports Marketing and Sponsorship, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1464-6668

Keywords

Article
Publication date: 20 June 2022

Ni-Yun Chen

This study examines whether insider share ownership and personal share collateral affect corporate payout decisions.

Abstract

Purpose

This study examines whether insider share ownership and personal share collateral affect corporate payout decisions.

Design/methodology/approach

This study estimates logit, Tobit and ordinary least squares regression models to explore how insider ownership is related to share repurchase probability, completion rates and the long-term performance following the repurchase announcements and how insider share collateral affects the above associations.

Findings

The results show that insider share ownership is negatively associated with the probability of announcing share repurchases and repurchase completion rates and is positively associated with the firm's post-announcement performance. This study further explores the incentive of insiders with high share collateral announcing share repurchases under a threat of margin call. For firms with a high percentage of insider share collateral, the results show that insider share ownership is associated with higher repurchase probability but is associated with lower repurchase completion rates and poorer post-announcement performance.

Originality/value

This study clarifies the interrelationships between insider ownership, insider share collateral and decisions in share repurchases and subsequent performance. This study provides evidence for both the convergence of interest and the entrenchment theories.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

Book part
Publication date: 19 October 2020

Xin Zhao, Greg Filbeck and Ashutosh Deshmukh

Prior studies document increased share repurchase activity after the temporary tax holiday under the American Jobs Creation Act (AJCA) of 2004. Our study examines the…

Abstract

Prior studies document increased share repurchase activity after the temporary tax holiday under the American Jobs Creation Act (AJCA) of 2004. Our study examines the moderating effect of financial statement readability on share repurchases in response to a temporary reduction in repatriation tax. Building on prior literature, we argue that firms with excess cash overseas, despite the lack of investment opportunities, produce less readable financial statements to hide bad news. We find that firms with less readable financial statements initiated higher levels of share repurchases after the AJCA. Our results contribute to the existing literature showing (1) firms hold excess cash overseas mainly for tax reasons rather than for nontax reasons such as precautionary motives or empire-building concerns and (2) firms return excess funds to investors rather than squander the funds once the tax cost of repatriation is reduced. Firms that suffer from the overinvestment problem using hard-to-read financial statements to hide the bad news of a lack of investment opportunities are more likely to benefit from the tax cut. Our study provides timely evidence of potential firm response to the 2017 Tax Cut and Jobs Act, which permanently removes the repatriation tax.

Book part
Publication date: 16 June 2008

Teresa Lightner

This study investigates whether corporations consider shareholder-level taxes when setting corporate distribution policy. I investigate the relation between the tax-rate…

Abstract

This study investigates whether corporations consider shareholder-level taxes when setting corporate distribution policy. I investigate the relation between the tax-rate differential on dividend and capital gains income and its effect on firms’ distribution policies. I find that firms consider shareholder-level taxes and that this association varies with the percentage of the firm owned by individual shareholders. Hence, firms increase share repurchases and decrease the percentage of total corporate payout in the form of a dividend as the tax-rate differential increases. Thus, an increased substitution effect occurs as capital gains become relatively more tax-advantaged compared to dividends. Furthermore, I find a positive association between the percentage of the firm owned by individual investors and the percentage of total corporate payout distributed as a repurchase. These findings are consistent with personal income taxes influencing managerial decisions regarding the payout of excess corporate funds.

Details

Advances in Taxation
Type: Book
ISBN: 978-1-84663-912-8

Open Access
Article
Publication date: 22 April 2022

Sumana Laparojkit and Muttanachai Suttipun

This study aims to examine the causal factors of customer motivation, trust and loyalty, influencing the level of repurchase intentions of local tourists travelling during…

Abstract

Purpose

This study aims to examine the causal factors of customer motivation, trust and loyalty, influencing the level of repurchase intentions of local tourists travelling during pandemic COVID-19 crisis in Thailand.

Design/methodology/approach

The population of this study comprised all Thai local tourists travelling in Thailand. Using simple random sampling of local tourists on travel in Thailand, quantitative data were collected from 500 tourists as the sampling, representing Northern Thailand, North-Eastern Thailand, Central Thailand, Southern Thailand and Bangkok. Path analysis, including correlation matrix and factor confirmation, was used to test the causal factors influencing the level of repurchase intentions.

Findings

Motivation trust, customer trust, customer loyalty and repurchase intentions of Thai domestic tourism were on a high level. In addition, there were positive influences of customer motivation, trust and loyalty on the level of repurchase intentions by local tourists travelling in Thailand.

Originality/value

The study results demonstrate that the social exchange theory can be used to explain the influences of customer motivation, customer trust and loyalty on repurchase intentions of domestic Thai tourism.

Details

Journal of Tourism Futures, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2055-5911

Keywords

Book part
Publication date: 4 April 2005

Jairo Laser Procianoy and Luis Fernando Moreira

This paper examines stock prices reaction to open market repurchases announcements at the São Paulo Stock Exchange between May 30, 1997 and October 31, 1998. This…

Abstract

This paper examines stock prices reaction to open market repurchases announcements at the São Paulo Stock Exchange between May 30, 1997 and October 31, 1998. This institutional scenario is a good testing ground for some theoretical hypotheses about stock repurchases announcements, because during this period there were taxes on capital gains but not on dividends. Using an event study methodology, we examined 110 episodes and found very small abnormal returns. Those results can not be explained by two main competing theoretical explanations. The Cumulative Abnormal Returns pattern found clearly suggests that repurchase announcements affected the behavior of stock prices in ways not described in previous studies.

Details

Latin American Financial Markets: Developments in Financial Innovations
Type: Book
ISBN: 978-1-84950-315-0

Article
Publication date: 15 April 2022

Muhammad Asghar Ali, Ding Hooi Ting, Ahmad Shahrul Nizam Isha, Muhammad Ahmad-Ur-Rehman and Shoukat Ali

The purpose of this study/paper is first to determine the impact of perceived recovery justice (PRJ) (as a second-order construct) on recovery satisfaction and repurchase

Abstract

Purpose

The purpose of this study/paper is first to determine the impact of perceived recovery justice (PRJ) (as a second-order construct) on recovery satisfaction and repurchase intentions; secondly, to investigate the mediating impact of customer affection and recovery satisfaction (on the relationship between PRJ and repurchase intentions and satisfaction and repurchase intentions, respectively); and thirdly, to examine the moderating effect of gender on the relationships between PRJ–recovery satisfaction–repurchase intentions.

Design/methodology/approach

The authors used a self-administrated survey technique for data collection. Afterwards, partial least square structural equation modelling was used to evaluate the data from 300 respondents (the automotive insurance industry in Punjab, Pakistan).

Findings

The findings show that PRJ, recovery satisfaction and customer affection positively predict repurchase intentions. PRJ also indirectly predicts repurchase intentions through the mediating effect of recovery satisfaction. Gender has a contingent effect on the PRJ–customer satisfaction–repurchase intentions relationship, such that the effect is higher for females than males. These findings have important theoretical and practical implications. To counter service failure, this study helps to draft effective strategies and policies for the insurance industry to make customers loyal patrons.

Practical implications

These findings have important theoretical and practical implications. To counter service failure, this study helps to draft effective strategies and policies for the insurance industry to make customers loyal patrons.

Originality/value

This study also tested a novel relationship, in that the authors used customer affection as a mediating factor between the satisfaction and repurchase intentions relationship. Moreover, the authors also tested the moderating role of gender in PRJ–recovery satisfaction–repurchase intentions associations.

Details

Journal of Asia Business Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1558-7894

Keywords

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