Actual Share Buybacks: Determinants and Price Effects

This thesis is prompted by the increasing number of Malaysian firms buying back their own shares on the open-market subsequent to the Asian financial crisis in late 1997. Studies on buybacks in Malaysia are very limited and have focused only on immediate price effects of buybacks. This study fills in the gap by i) examining the relevance of posited determinants of buyback decisions and ii)determining the shareholders' benefits by examining the price effects of buybacks in the announcement effects and in the long-run effects. The first part of the thesis examines the determinants of actual buyback decisions while the second part analyses the price effects of buyback activities(intentions and implementations) in immediate effects and in the long-run. The study examines all actual buyback firms that have purchased more than one percent of their ordinary shares cumulatively from 1999 to 2006. Implications stated in six hypotheses which are: i) signalling hypothesis, ii) free cash flow hypothesis, iii) optimal capital structure hypothesis, iv) dividend substitution hypothesis(DSH),v) stock liquidity hypothesis, and vi) management incentives hypothesis, are examined to see whether these could be supported in the context of actual buyback decisions in Malaysia. Three issues regarding the price impacts of buyback activities are analysed: i) price performance surrounding the announcement of buyback intentions, ii) price performance surrounding the announcement of buyback implementations and, iii) long-run price performance following buyback implementations. The findings suggest that signalling, liquidity, and management intention hypotheses are significant in explaining actual buyback decisions. This study indicates that actual buybacks were significantly induced by poor market performance, expectation of better future operating performance, poor prior stock liquidity level, nianagement of earnings, and desires to increase directors' control. The results for the immediate price effects indicate that the market is indifferent to announcement of buyback intentions but responds positively to buyback implementations. In the long-run, it is found that buyback firms do not experience significant price gains in the 3-year period following the implementation of buyback programs regardless of the benchmarks used (KLCI and matching-firms). This study contributes to the understanding of buybacks from the perspective of a developing country where most of the firms have concentrated ownership pattern and activities on buybacks are strictly regulated. Concentrated ownership could explain free cash flow hypothesis, dividend substitution hypothesis, earnings management and directors' control behaviour in buyback decisions

Ethnic diversity and share repurchases policy

This study investigates whether board diversity attributes as recommended by the Malaysian Code on Corporate Governance is relevant and effective in curbing misuse of share repurchases policy.Based on 275 firm-year observations among share repurchasing firms between 2006 and 2010, we find that ethnic diversity can help curb the potential misuse of managerial discretion in deciding whether to frequently repurchase their own shares. Our study contributes to the existing literature on board characteristics in several ways.First, it provides evidence that board diversity in terms of ethnicity can significantly affect companies’ policy.We find that companies with less diverse board as measured by ethnic group are more likely to frequently embark on share repurchase which have a detrimental effect on current earnings. Second, we find that a large number of directors on the board can significantly reduce the tendency of managerial opportunistic behaviour.Finally, having independent directors alone does not guarantee companies are free from unwarranted opportunistic behaviours.Therefore, the study provides early evidence of the efficacy of recent Malaysian Code on Corporate Governance 2012 which recommended diverse balance of board members to ensure proper monitoring role and curbing the likelihood of unwarranted managerial opportunistic behaviour by unduly controlling owners

Compte-rendu de lecture de l'ouvrage de Rousseaux Xavier et Lévy René (dir.). Le pénal dans tous ses Etats. Justice, Etats et sociétés en Europe (XIIe-XXe siècles), Bruxelles, Publications des Facultés universitaires Saint Louis, 1997, 462 p.

en ligne à l'adresse suivante : http://www.reds.msh-paris.fr/publications/revue/biblio/ds039-c.htm#11International audienceC'est à l'issue des travaux du séminaire qui s'est tenu de 1992 à 1994 aux Facultés Universitaires Saint Louis de Bruxelles sur Les Etats et le pénal : acculturation juridique et intégration nationale que s'est élaboré cet ouvrage sous la direction de René Lévy et Xavier Rousseaux qui poursuivent ainsi une collaboration déjà fructueuse. L'introduction des deux auteurs, sur une thématique particulièrement aussi riche et complexe que celle de l'Etat, réussit une double performance : allier la densité d'informations et de références au service d'une problématique, claire, épurée, efficace. L'idée est bien de situer ces contributions au cœur d'un ensemble de recherches sur l'Etat, d'en spécifier la teneur et d'approfondir le ou les rapports liant ce dernier aux « fonctions traditionnellement considérées comme formant le cœur même de l'Etat

Market performance on resale of treasury shares

The study examines the announcement effects on resale of treasury shares among publicly listed firms in Malaysia.All firms that resale their treasury shares between 2001 and 2012 are analyzed using standard event methodologies namely market adjusted return (MAR) and market model (MM).We find that resale firms experience significant positive 4% abnormal returns in the 5 days prior to the actual resale of treasury shares.However, there are no abnormal gains realized following the actual resale of treasury shares date, suggesting that the market is semi-strongly efficient where prices can fully reflect all publicly available information

Signaling and substitution hypotheses in Malaysian share repurchases

There is an increasing trend of firms undertaking share repurchases in Malaysia, yet limited studies on repurchase activities have been published. This study attempts to examine managerial motives for repurchase in Malaysia using signaling and substitution hypotheses.Unlike firms in western countries, firms in Malaysia are bound by strict rules and regulations before embarking on repurchases, thus it is argued that motives for share repurchases would be different from those of the developed markets.The results of this study are consistent with signaling hypothesis where Malaysian firms repurchase shares partly to signal undervaluation and better operating performance.They also buy back shares whenever there is an increase in cash flows.However, there is no evidence to support that these firms bought back shares to substitute dividend payments as documented by studies from western countries. In fact, repurchases are used to complement dividends.Further evidence shows that managerial ownership has significant influence on firms’ repurchase decisions

Influence of Capital Structure on Profitability: Empirical Evidence from Listed Nigerian Non-Financial Firms

Sound and effective capital structure is important for sustainable growth and development of any firm. This research work investigates the impact of capital structure on the financial performance of firms in Nigeria. A total of one hundred and six (106) non-financial firms listed on the Nigerian Stock Exchange between 2012 to 2016 were used as sample. Panel data for the selected firms were generated and analyzed using fixed effect model as a method of estimation. The dependent variable for the study is profitability which was measured as Return on Assets (ROA). The independent variables on the other hand are total debts to total assets (TD), total long term debts to total assets (LTD) and short term debts to total assets (STD) used independently. Sales Growth, Firm Growth and Firm Age are used as control variables. Results indicates a negative significant relationship between Total Debt to Asset, and short term debt with return on assets (ROA), on the other hand, an insignificant relationship between long term debt and return on assets

Earnings Management: A Case of Related Party Transactions

This study was conducted on the related party transaction and earnings management. Agency theory provides that managers may engage into self-enrichment transactions to maximize their benefits at the detriment of the shareholders of the firm. Though, management or concentrated ownership was suggested as the possible solution to this problem, this form of ownership structure has its peculiar problems which are termed as type II agency problem. Controlling shareholders are found to be using their voting power to extract extra benefits from the firm through the insider information and in many instances engage in detrimental related party transactions at the expense of minority shareholders. This study have identified how and why controlling shareholders or managers use related party transaction as a means to perpetrate accrual-based or real activity earnings management. It was recommended that empirical study be conducted to investigate whether disclosure regulation can constrain the controlling shareholders or management against the use of real-activity management through related party transaction. Keywords: Related Party Transactions, Accrual-Based Earnings Management and Activity-Based Earnings Management. JEL Classifications: G34, G38, G18

Employee stock options and real earnings management through accretive share buyback in Malaysia

We examine the association between employee stock options and real earnings management through accretive buyback programs. Our study uses unbalanced panel logistic estimation model for a sample of 601 firms’ observations that involved in accretive share buyback over the period 2010-2015. The outcomes reveal that stock options exercised by insiders (executives and employees) are associated with high likely to engage in accretive share buyback activities. The results also provide evidence that a large percentage of the independent directors serving the board constrain real earnings management by engaging in accretive share buybacks. Our study contributes to the debate on stock options, and their impact on accretive buyback programs to manage reported EPS. Our findings provide insight to investors and the policymakers that managers holding stock options have more incentive to manage EPS through accretive share buyback activities. Academic researchers could extend this study by separating among executive and employees’ stock options and between exercisable and non-exercisable stock options

Ownership structure and firm performance in Malaysia

The aim of the study is to investigate the effect of different type of ownership structure on firm performance proxied by market measure (market to book value, MTBV) based on companies listed on Bursa Malaysia in the year 2006 to 2010. Firm performance in this study is proxied by market measure (market to book value, MTBV). Results of the study indicate that director ownership and foreign ownership have non-linear relationship with MTBV using quadratic function. While family ownership and ownership by government-linked investment companies have linear relationship. Director ownership has negative relationship which indicate the entrenchment effect at the lower stake.However, director ownership has positive relationship meaning the alignment effect occurs at the higher stake. However, foreign ownership has alignment effect at the lower stake and entrenchment effect at the higher stake. Government-linked investment companies has negative relationship.The findings of the study add to the ownership structure literature in the concentrated ownership market

Expropriation of minority shareholders' rights: Evidence from Malaysia

The objectives of this study are to investigate the factors and the extent level of expropriation of minority shareholders’ rights in context of Malaysia.Analysis of sixty companies listed from two industries in Bursa Malaysia was selected.Descriptive analysis and ordinary least squares (OLS) regression model are performed in this study The variables tested are ownership concentration, firm size, board independence, profitability, level of leverage and firm growth.From these variables, only three variables can be concluded as factors influencing the expropriation of minority shareholders' rights in Malaysia. The number of independent outside directors increases the potential for expropriation of minority shareholders' rights.However, this relationship became opposite when the directors have a different characteristic among boards that affect their independence level.Profitability and growth are highly correlated.When the model is estimated using either one of them, the result is significantly negative, which means that profitable or growing firms have less incentives to engage in related party transactions