This paper aims to extend the empirical literature on the determinants of the value created by stock repurchase programs by analyzing the characteristics of the repurchase decision-making groups. Based on a sample of 200 US-listed firms from 1998-2004, the paper examines empirically the relationship between value created by stock repurchase programs and board of directors’ characteristics. The analysis depends on panel data analysis to consider unobservable fixed-effects in this relationship.
The results provide evidence of a significant relation between board of directors’ characteristics and value created by the stock repurchase programs. The two important determinants are directors’ independence and directors’ outside experience. However, we find that this relationship changed significantly for some measures after the adoption of the 2002 Sarbanes-Oxley Act.
Cette étude examine les déterminants de la valeur créée aux actionnaires par les programmes de rachat d’actions. Pour un échantillon de 200 firmes américaines entre 1998-2004, l’étude analyse empiriquement la relation entre les caractéristiques du Conseil d’administration et la valeur créées par les programmes de rachat d’actions. L’étude utilise de la méthodologie de données de panel pour tenir compte des effets inobservables fixes dans cette relation.
Les résultats montrent que l’indépendance et l’expérience des administrateurs sont les deux facteurs qui expliquent la valeur créée aux actionnaires. Toutefois, cette relation change significativement après l’introduction de la loi sur la sécurité financière la « Sarbanes-Oxley Act » de 2002.
Veuillez télécharger l’article en PDF pour le lire.
- Bai, C.E., Q. Liu, J. Lu, F.M. Song and J. Zhang. 2004. “Corporate Governance and Market Valuation in China,” Journal of Comparative Economics, vol. 32, pp. 599-616.
- Bhagat, S. and B. Black. 1999. “The uncertain relationship between board composition and firm performance,” Business Lawyer, vol. 54, pp. 921-963.
- Bhattacharya, U. and A. Dittmar. 2002. “Costless Versus Costly Signaling: Theory and Evidence from Share Repurchases.” working paper, SSRN, Kelley School. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=250049
- Chan, K., D. Ikenberry and I. Lee. 2004. “Economic sources of gain in stock repurchases,” Journal of Financial and Quantitative Analysis, vol. 39, pp. 461-479.
- Cheng, S. 2008. “Board size and the variability of corporate performance,” Journal of Financial Economics, vol. 87, pp. 157-176.
- Coles, J.L., N.D. Daniel and L. Naveen. 2008. “Boards: does one size fit all?,” Journal of Financial Economics, vol. 87, pp. 329-356.
- Comment, R. and G.A. Jarrell. 1991. “The Relative Signalling Power of Dutch-Auction and Fixed-Price Self-Tender Offers and Open-Market Share Repurchases ,” The Journal of Finance, vol. 46, pp. 1243-1271.
- Dahya, J. and J.J. Mcconnell. 2005. “Outside directors and corporate board decisions,” Journal of Corporate Finance, vol. 11, pp. 37-60.
- Deli, D.N. and S.L. Gillan. 2000. “On the demand for independent and active audit committees,” Journal of Corporate Finance, vol. 6, pp. 427-445.
- Dezoort, F.T., R.H. Dana, S.A. Deborah and A.R. Scott. 2002. “Audit committee effectiveness: A synthesis of the empirical audit committee literature,” Journal of Accounting Literature, vol. 21, pp. 38-75.
- Dittmar, A.K. 2000. “Why do firms repurchase stock?,” Journal of Business, vol. 73, pp. 331-355.
- Dittmar, A. and R.F. Dittmar. 2002. “Stock Repurchase Waves: An Explanation of the Trends in Aggregate Corporate Payout Policy,” working paper, SSRN. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=346548
- Dittmar, A. and R.F. Dittmar. 2007. “ The Timing of Stock Repurchases,” working paper, SSRN.
- Eisenberg, T., S. Sundgren and M.T. Wells. 1998. “Larger board size and decreasing firm value in small firms,” Journal of Financial Economics, vol. 48, pp. 35-54.
- Fairchild, R.J. 2006. “When Do Share Repurchases Increase Shareholder Wealth?,” Journal of Applied Finance, vol. 16, pp. 31-36.
- Fama, E.F. 1980. “Agency Problems and the Theory of the Firm,” Journal of Political Economy, vol. 88, pp. 288-307.
- Fama, E.F. and M.C. Jensen. 1983. “Separation of Ownership and Control,” working paper, SSRN. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=94034.
- Fenn, G.W. and N. Liang. 2000. “Corporate Payout Policy and Managerial Stock Incentives,” working paper, SSRN. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=214868.
- Fernández, P. 2001. “A Definition of Shareholder Value Creation,” working paper, SSRN, University of Navarra. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=268129.
- Fich, E.M. and L.J. White. 2005. “Why do CEOs reciprocally sit on each other’s boards?,” Journal of Corporate Finance, vol. 11, pp. 175-195.
- Gendron, Y. and J. Bedard. 2006. “On the constitution of audit committee effectiveness,” Accounting, Organizations and Society, vol. 31, pp. 211-239.
- Ginglinger, E. and J. Hamon. 2007. “Actual share repurchases, timing and liquidity,” Journal of Banking and Finance, vol. 31, pp. 915-938.
- Ginglinger, E. and J.F. L’her. 2006. “Ownership structure and open market stock repurchases in France,” European Journal of Finance, vol. 12, pp. 77-94.
- Grullon, G. and R. Michaely. 2004. “The Information Content of Share Repurchase Programs,” Journal of Finance, vol. 59, pp. 651-680.
- Hackethal, A. and A. Zdantchouk. 2006. “Signaling power of open market share repurchases in Germany,” Financial Markets and Portfolio Management, vol. 20, pp. 123-151.
- Hirtle, B. 2001. “How Do Stock Repurchases Affect Bank Holding Company Performance?,” working paper, SSRN. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=267534.
- Hurlin, C. 2001. “L’Econométrie des Données de Panel,” Available at : http://www.univorleans.fr/deg/masters/ESA/CH/CoursPanel_Chap1.pdf.
- Ikenberry, D., J. Lakonishok and T. Vermaelen. 1995. “Market underreaction to open market share repurchases,” Journal of Financial Economics, vol. 39, pp. 181-208.
- Ikenberry, D., J. Lakonishok and T. Vermaelen. 2000. “Stock repurchases in Canada: Performance and Strategic Trading,” Journal of Finance, vol. 55, pp. 2373-2397.
- Isagawa, N. 2000. “Open-market stock repurchase and stock price behavior when management values real investmen"”, The Financial Review, vol. 35, pp. 95-108.
- Jean, B., C. Sonda Marrakchi and C. Lucie. 2004. “The Effect of Audit Committee Expertise, Independence, and Activity on Aggressive Earnings Management,” Auditing, vol. 23, pp. 13-35.
- Jensen, M.C. 1993. “The modern industrial revolution, exit, and the failure of internal control systems,” The Journal of Finance, vol. 48, pp. 831-880.
- Kahle, K.M. 2002. “When a buyback isn't a buyback: open market repurchases and employee options,” Journal of Financial Economics, vol. 63, pp. 235-261.
- Lamba, A.S. and I. Ramsay. 2005. “Comparing Share Buybacks in Highly Regulated and Less Regulated Market Environment,” Australian Journal of Corporate Law, vol. 17, pp. 261-280.
- Lee, Y.-G., S.-C. Jung and J.J.H. Thornton. 2005. “Long-term stock performance after open-market repurchases in Korea,” Global Finance Journal, vol. 16, pp. 191-209.
- Li, K. and W.J. Mcnally. 2007. “The information content of Canadian open market repurchase announcements,” Managerial Finance, vol. 33, pp. 65-80.
- Louis, H. and H. White. 2007. “Do managers intentionally use repurchase tender offers to signal private information? Evidence from firm financial reporting behavior,” Journal of Financial Economics, vol. 85, pp. 205-233.
- Mak, Y.T. and Y. Kusnadi. 2005. “Size really matters: Further evidence on the negative relationship between board size and firm value,” Pacific-Basin Finance Journal, vol. 13, pp. 301-318.
- Morck, R., A. Shleifer and R. Vishny. 1988. “Management Ownership And Market Valuation,” Journal of Financial Economics, vol. 20, pp. 295-315.
- Oded, J. 2005. “Why do firms announce open-market repurchase programs?,” Review of Financial Studies, vol. 18, pp. 271-300.
- Oswald, D.R. and S. Young. 2004. “Open Market Share Reacquisitions, Surplus Cash, and Agency Problems,” Working paper, SSRN. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=504682.
- Park, Y.W. and H.-H. Shin. 2004. “Board composition and earnings management in Canada,” Journal of Corporate Finance, vol. 10, pp. 431-457.
- Persons, J.C. 1997. “Heterogenious shareholders and signaling with Share Repurchase,” Journal of Corporate Finance, vol. 3, pp. 221-249.
- Petra, S. 2007. “The Effects of Corporate Governance on the Informativeness of Earnings,” Economics of Governance, vol. 8, pp. 129-152.
- Porter, G.E., R.L. Roenfeldt and N.W. Sicherman. 2000. “Open Market Repurchases: The Value From Buying Shares at a Discount,” Journal of Applied Corporate Finance, vol. 13, pp. 122-127.
- Rau, P.R. and T. Vermaelen. 2002. “Regulation, taxes and share repurchases in the U. K.,” Journal of Business, vol. 75, pp. 245-282.
- Roehner, B.M. 2005. “Stock Markets are not what we thing they are: the Key Roles of Cross-Ownership and Corporate Treasury Stock,” Physica A, vol. 347, pp. 613-625.
- Seifert, U. and R. Stehle. 2003. “Stock Performance Around Share Repurchase Announcements in Germany,” working paper, available at: http://opus.zbwkiel.de/volltexte/2004/1660/pdf/dpsfb200348.pdf.
- Sevestre, P. 2002. Économétrie des données de panel. DUNOD, France.
- Skjeltorp, J.A. 2004. “The market impact and Timing of open market share repurchase programs in Norway,” working paper. Available at: http://unjobs.org/authors/johannes-a.-skjeltorp.
- Spira, L. 1999. “Independence in Corporate Governance: the Audit Committee Role,” Business Ethics: A European Review, vol. 8, pp. 262-273.
- Varaiya, N., J. Kim and R. Schremper. 2005. “Survey on Open Market Repurchase Regulations: cross-country examination of the ten largest stock markets,” Corporate Finance Review, vol. 9, pp. 29-38.
- Webb, E. 2008. “Bank stock Repurchase and Measures of Corporate Governance,” working paper, Federal Reserve Bank of Philadelphia.
- Zhang, H. 2005. “Share price performance following actual share repurchases,” Journal of Banking and Finance, vol. 29, pp. 1887-1901.