Journal ArticleDOI
Open market share repurchases and the free cash flow hypothesis G35
Nikos Vafeas,O. Maurice Joy +1 more
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In this article, the authors investigate the source of shareholder gains when open market share repurchases are announced and find evidence that abnormal stock market returns are related to the reduction of free cash flow agency costs.Citations
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Determinants of the Choice between Alternative Share Repurchase Methods
TL;DR: In this paper, the authors provided an empirical examination of the determinants of the choice between alternative share repurchase methods and found that the likelihood of selecting a self-tender offer over an open market share repurchurchase increases with the repurchasing firm's agency costs of free cash flow, inside ownership percentage, leverage, prebuyback stock performance, and the magnitude of cash involved in the transaction.
Journal ArticleDOI
Effect of Leverage on Firm Market Value and How Contextual Variables Influence this Relationship
TL;DR: In this paper, the authors applied a least square dummy variable (LSDV) model to estimate the effect of leverage on firm market values and examined how contextual variables influence this relationship.
Journal ArticleDOI
The Announcement Effects of Restricted Open Market Share Repurchases: Experience from Taiwan
TL;DR: In this paper, the authors empirically examined the effects of 451 restricted share repurchase announcements in Taiwan and found that the traditional signaling hypothesis and the free cash flow hypothesis can function simultaneously to explain the effects.
Journal ArticleDOI
An empirical investigation of capital expenditure announcements
Nikos Vafeas,Catherine Shenoy +1 more
TL;DR: In this article, the market reaction to capital expenditure announcements is studied in the backdrop of Jensen's (1986) free cash flow hypothesis, and initial results confirm McConnell and Muscarella's (1985) original findings suggesting that announcement-period returns follow in sign announced changes in capital spending.
Journal ArticleDOI
The effects of bank relations on stock repurchases: Evidence from Japan
TL;DR: In this article, the effects of bank relations on stock repurchase in Japan were examined, and it was found that stock buyback announcements are positively related to equity ownership by main banks, but negatively related to nonbank debt ratios.
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Posted Content
Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers
TL;DR: In this paper, the benefits of debt in reducing agency costs of free cash flows, how debt can substitute for dividends, why diversification programs are more likely to generate losses than takeovers or expansion in the same line of business or liquidationmotivated takeovers, and why the factors generating takeover activity in such diverse activities as broadcasting and tobacco are similar to those in oil.
Journal ArticleDOI
Tobin's $q$ Ratio and Industrial Organization
Journal ArticleDOI
Free Cash Flow and Stockholder Gains in Going Private Transactions
Kenneth Lehn,Annette B. Poulsen +1 more
TL;DR: In this article, the authors investigate the source of stockholder gains in going private transactions and find support for the hypothesis advanced by Jensen that a major source of these gains is the mitigation of agency problems associated with free cash flow.
Posted Content
A Test of the Free Cash Flow Hypothesis: The Case of Bidder Returns
TL;DR: In this paper, the authors test the free cash flow hypothesis on a sample of large investments made by firms, namely decisions to acquire control of other firms through tender offers, and show that the hypothesis is false.
Journal ArticleDOI
Dividend announcements: Cash flow signalling vs. free cash flow hypothesis?
TL;DR: In this paper, the authors used Tobin's Q ratios less than unity to designate overinvestors and found that the average return associated with announcements of large dividend changes is significantly larger for firms with Q's less-than-unity than for other firms.
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The Relative Signalling Power of Dutch-Auction and Fixed-Price Self-Tender Offers and Open-Market Share Repurchases
Robert Comment,Gregg A. Jarrell +1 more