A Study on Magnitude of U.S. Bank Holding Company Share Repurchase Announcement: Impact of Motives and Regulation
Date Issued
2006
Date
2006
Author(s)
Wang, Chiung-Yi
DOI
en-US
Abstract
This paper examines how each motivation affects the magnitude of repurchase announcement by bank holding companies in the United States. There are several motivations which may impact the magnitude of share repurchase announcement: to substitute dividends; to signal to the market that the bank’s stock is undervalued; to deter the takeover threat; to undo the dilution effect of stock options and to payout free cash flows. The banking industry is of particular interest because banks are under strict monitoring and regulation. In addition, how specific activities such as securitizations influence bank share repurchase needs further discussion. The purpose of this study is to assess how motivations and regulation affect the magnitude of repurchase announcement by bank holding companies.
From the empirical result, we find that banks will announce greater stock repurchases when the dividends payout ratio is higher; when the banks are undervalued; when the banks have more cash in hand; when the investment opportunities are less and when the banks are under takeover threat.
Subjects
庫藏股宣告規模
盈餘分派
訊號假說
股票選擇權
資本適足率
資產證券化
風險
自由現金流量
併購
Magnitude of repurchase announcement
Payout
Signaling
Stock options
Capital adequacy regulation
Securitization
Risk
Free cash flow
Takeover deterrence
Type
other
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