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Determinants of shares repurchased in on-market buy-backs
Tim Brailsford, The University of Queensland
Damien Marchesi, The University of Queensland
Andreas Simon, The University of Queensland
Irene Tutticci, The University of Queensland
ABSTRACT. This study distinguishes between firm characteristics at the announcement of an on-market buy-back and changes in these factors over a buy-back program to explain both the proportion of shares a firm intends to repurchase and the number of shares actually repurchased. Our study is conducted in Australia where a more regulated setting for buy-backs provides us with rich and timely data about on-market buy-backs. Disclosure requirements also formally reveal the reasons managers have for undertaking an on-market buy-back. Our analysis shows that the value of the firm, the proportion of equity executive directors hold in the form of options, the proportion of employee options outstanding are all important in explaining the proportion of shares the firm intends to repurchase. Further analysis reveals that variables at the announcement date, proxied by the maximum proportion of shares intended to be repurchased, are most important in explaining the proportion of shares actually repurchased.
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