The Market Valuation of Share Repurchases in Europe

We analyze a uniquely constructed data set of open market share repurchases across a sample of European firms. We find that the announcement date market reaction is lower than that in the US, mainly because of (i) the relatively large number of recurring announcements which generate significantly lower returns than the initial announcements of intention to repurchase shares; (ii) the rather low market reaction in France, due probably to specific governance and corporate cultural issues; and (iii) the regulatory reform that allowed UK firms to keep the repurchased shares as treasury stock, which decreased their market impact. Across our countries, taxation, shareholder protection, and the European Union's Market Abuse Directive do not affect significantly the market valuation of repurchases. Our results imply that, ultimately, domestic institutional specificities and reforms play significant roles in the market valuation and popularity of share repurchases

Open Market Share Repurchases in Europe: A Cross Country Analysis

This thesis addresses the topic of open market share repurchases in Europe over the period 1997 to 2006. This thesis strives to document and clarify the managerial motives as well as the market perception and respective reaction to open market share repurchases, in a cross country framework. Therefore this thesis delves into the hypotheses that have been developed in the literature for interpreting these issues. The theories and hypotheses investigated in this thesis are mainly the information asymmetry and signalling for undervaluation, the tax hypothesis, the dividend substitution, the capital structure adjustment, and agency costs hypotheses under varying regulatory and institutional frameworks. Consistent with the U.S. evidence, share repurchases are popular in the U.K., but I find that the market does not have the same level of reaction as in the U.S. For Germany and France, share repurchase activity has been a more recent phenomenon, but not common. Nevertheless due to recent regulatory changes, this trend seems to be changing in favour of share repurchases. The empirical evidence in this thesis shows that market reaction to the announcement of intention to repurchase shares in the open market varies significantly among countries, and that the market becomes more accustomed to subsequent announcements made by the same firms. Furthermore, I find that ownership concentration, firm size, leverage, and in some cases past share price performance, have a significant impact on the market reaction, as well as on the managerial motives for announcing an open market share repurchase programme. Moreover, the evidence shows that not all the managerial motives and drivers of the market reaction have a uniform impact throughout the varying markets. Rather, it is only a number of firm characteristics that consistently influence the likelihood of an open market share repurchase in all three countries. Furthermore, I find that firms on average repurchase approximately three quarters of the shares targeted at the time of the announcement, suggesting that on average, firms repurchase a substantial portion but not the intended amount. In addition, I find that managers repurchase shares in order to provide price support. Finally, this thesis provides evidence that it is the actual trades and their respective reporting, and not the repurchase announcement itself that convey risk related information to the market. Therefore, the reporting of the actual repurchase trades sends positive signals to the market, which are reflected on the reduction of firms’ systematic risk

Convexity Adjustment for Constant maturity Swaps in a Multi-Curve Framework

In this paper we propose a double curving setup with distinct forward and discount curves to price constant maturity swaps (CMS). Using separate curves for discounting and forwarding, we develop a new convexity adjustment, by departing from the restrictive assumption of a flat term structure, and expand our setting to incorporate the more realistic and even challenging case of term structure tilts. We calibrate CMS spreads to market data and numerically compare our adjustments against the Black and SABR (stochastic alpha beta rho) CMS adjustments widely used in the market. Our analysis suggests that the proposed convexity adjustment is significantly larger compared to the Black and SABR adjustments and offers a consistent and robust valuation of CMS spreads across different market conditions

A survey of shipping finance research: setting the future research agenda

Financing shipping related investment projects has always been a focal area of debate and research within the international maritime industry since access to funding can determine the competitiveness of a capital-intensive business as well as its success or failure under adverse market conditions. This paper provides, for the first time, a comprehensive and structured survey of all published research in the area of shipping finance and investment. The review spans approximately four decades (1979-2018) of empirical evidence, including 162 studies published in 48 scholarly journals, complemented with select books and book chapters. The study provides a bibliometric analysis and comprehensive synthesis of existing research offering an invaluable source of information for both the academic community and business practice, shaping the future research agenda in shipping finance and investment

Pro-Cyclical Petroleum Investments and Cost Overruns in Norway

Development projects in the oil industry often have cost overruns. Through analysis of data from Norwegian development projects in the petroleum industry, this paper investigates the common effect of business cycle developments on cost overruns. Lack of capacity and expertise in a tight supplier market yield cost inflation and difficulties in managing projects. Unlike previous analyses of cost overruns, we analyse projects over a long time period to capture the cyclical effects. We document a statistically significant positive relationship between oil price developments and cost overruns, with shocks or surprises to the oil price during the project implementation having a larger impact on cost overruns than the oil price level itself. Cost overrun ultimately leads to reduced competitiveness for the industry, and we discuss consequences and policy implications for business and society of these cost overruns