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Regulation, Taxes, and Share Repurchases in the United Kingdom

Posted: 16 Mar 2001  

Theo Vermaelen

INSEAD - Finance

P. Raghavendra Rau

University of Cambridge

Abstract

We examine share repurchase activity in the United Kingdom over a period when the tax and regulatory environment changed drastically. We find that the form and intensity of repurchase activity in the United Kingdom is influenced by the tax consequences for pension funds. We also find that firms announcing share repurchases earn smaller excess returns, both in the short run and the long run, than those earned by firms in the United States. This is because of regulatory provisions in the United Kingdom that make it less likely that the firms can use superior information to buy back shares when their shares are undervalued.

Notes:

Suggested Citation

Vermaelen, Theo and Rau, P. Raghavendra, Regulation, Taxes, and Share Repurchases in the United Kingdom. Journal of Business, Vol. 75, No. 2, April 2002. Available at SSRN: https://ssrn.com/abstract=259580

Theo Vermaelen

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
33 1 60 72 42 63 (Phone)
33 1 60 72 40 45 (Fax)

P. Raghavendra Rau (Contact Author)

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

HOME PAGE: http://www.raghurau.com/

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