Off-Market Buybacks in Australia: Evidence of Abnormal Trading around Key Dates

27 Pages Posted: 21 Jan 2013

See all articles by Hue Hwa Au Yong

Hue Hwa Au Yong

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Christine A. Brown

Department of Banking and Finance; Financial Research Network (FIRN)

Chloe Choy Yeing Ho

Monash University - Department of Accounting and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 30, 2012

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.

Keywords: tax arbitrageurs, off-market share buybacks, imputation credits, trading volume

JEL Classification: G14, G35

Suggested Citation

Au Yong, Hue Hwa and Brown, Christine A. and Ho, Chloe, Off-Market Buybacks in Australia: Evidence of Abnormal Trading around Key Dates (November 30, 2012). 2013 Financial Markets & Corporate Governance Conference, Available at SSRN: https://ssrn.com/abstract=2204283 or http://dx.doi.org/10.2139/ssrn.2204283

Hue Hwa Au Yong

Monash University - Department of Banking and Finance ( email )

PO Box 197
Caulfield East, Victoria 3145
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Christine A. Brown (Contact Author)

Department of Banking and Finance ( email )

Building 11E
Clayton, Victoria 3800
Australia
+61 3 99031793 (Phone)
+61 3 99055475 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: www.firn.org.au

Chloe Ho

Monash University - Department of Accounting and Finance ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

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