A Study on Magnitude of U.S. Bank Holding Company Share Repurchase Announcement: Impact of Motives and Regulation

• Main Authors: Chiung-Yi Wang, 王瓊儀
• Other Authors: 劉啟群
• Format: Others
• Language: en_US
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/88458141802390931184

碩士 === 國立臺灣大學 === 會計學研究所 === 94 === 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.