Determinants of on- and off-market buybacks in the Australian dividend imputation tax setting

Gishkariany, Michael George. (2008). Determinants of on- and off-market buybacks in the Australian dividend imputation tax setting Honours Thesis, School of Business, The University of Queensland.

       
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Author Gishkariany, Michael George.
Thesis Title Determinants of on- and off-market buybacks in the Australian dividend imputation tax setting
School, Centre or Institute School of Business
Institution The University of Queensland
Publication date 2008
Thesis type Honours Thesis
Total pages 98
Language eng
Subjects 14 Economics
Formatted abstract Australia operates in a dividend imputation tax setting whereby firms generate franking credits when corporate tax is paid on profits. Franking credits, which are a pre-collection of personal tax at the corporate level, can be attached to cash dividends paid by firms and used by investors to off-set against personal income tax obligations. Off-market buybacks in Australia are unique in that part of the buyback consideration can be structured with a fully franked dividend and as a result enable firms to repurchase stock at a significant discount. Buybacks structured in such a fashion are beneficial to low marginal tax inventors and distort traditional buyback theories. The popularity of off-market buybacks has been matched by the growth in institutional and superannuation fund investment in Australian equity markets.

This thesis conducts an empirical investigation of competing buyback theories between a sample of on- and off-market repurchasing firms. Our results indicate that off-market buybacks are largely driven by a firm's level of excess franking credits and level of institutional ownership, suggesting that management are influenced by the tax status of institutional investors when conducting payout policy. We also report evidence of off-market firms repurchasing stock in order to move towards its target or optimal capital structure.


 
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Created: Wed, 27 Oct 2010, 09:47:53 EST by Ning Jing on behalf of The University of Queensland Library