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Title

Takeover deterrent effect of on-market share buyback in Australia

Author(s)

Doan, Dong Hai Trieu;  Yap, Chee Jin;  Gannon, Gerard

Abstract

This study examines whether Australian firms use on-market share buybacks to deter unwanted takeover risk. We found a statistically significant and positive relationship between a firm’s ex-ante takeover probability and its on-market share buyback activities. Our result is robust to alternative modelling techniques, namely TOBIT and Censored Quantile Regressions. This paper found evidence that in a dividend imputation credit taxation system the yield of share buyback is positively related to dividend payments. However, on-market share buyback activity is closely related to temporary cash flows rather than to permanent operating cash flows. This might indicate that, besides dividend payments, Australian firms take advantage of the financial flexibility that comes with share buybacks to redistribute nonpermanent cash flows to their shareholders.

Publication type

Journal article

Research centre

Swinburne University of Technology

Source

Australasian Accounting Business and Finance Journal, Vol. 5, no. 4 (2011), pp. 65-84

Publication year

2011

FOR Code(s)

1501 Accounting, Auditing and Accountability;  1502 Banking, Finance and Investment

Keyword(s)

Open-market;  Share buyback;  Takeover deterrent

Publisher

University of Wollongong

ISSN

1834-2000

Publisher URL

http://ro.uow.edu.au/aabfj/vol5/iss4/6/

Copyright

Copyright © 2012 Australasian Accounting Business and Finance Journal and Authors. Published version reproduced here with the kind permission of the publisher.

Full text

Peer reviewed