Off-market buybacks in Australia: Evidence of abnormal trading around key dates

Au Yong, Hue Hwa, Brown, Christine, & Ho, Chloe Choy Yeing (2014) Off-market buybacks in Australia: Evidence of abnormal trading around key dates. International Review of Finance, 14(4), pp. 551-585.

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Abstract

Off-market share buybacks in Australia are often structured with the buyback price comprising a large dividend component (which may carry imputation tax credits) and a small capital component. This unique structure has the consequence that institutions on low tax rates stand to benefit most from selling shares back to the company. In this paper, we explore evidence of abnormal trading activities around key dates in the conduct of off-market buybacks and investigate the drivers of these activities. We find evidence of abnormal trading activities around the initial announcement and the final announcement dates of the buyback. The significant differences in abnormal volumes between the buybacks with and without imputation tax credits highlight the importance of tax motivations in explaining abnormal trading activities in the shares of companies conducting off-market buybacks.

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ID Code: 90720
Item Type: Journal Article
Refereed: Yes
DOI: 10.1111/irfi.12037
ISSN: 1369-412X
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Funding:
Copyright Owner: 2014 International Review of Finance Ltd.
Deposited On: 23 Jun 2016 22:47
Last Modified: 28 Aug 2016 17:40

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