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Leveraged buybacks
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Lei, Zicheng and Zhang, Chendi (2016) Leveraged buybacks. Journal of Corporate Finance, 39 . pp. 242-262. doi:10.1016/j.jcorpfin.2016.04.004 ISSN 0929-1199.
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Official URL: http://dx.doi.org/10.1016/j.jcorpfin.2016.04.004
Abstract
Debt-financed share buybacks generate positive short-term and long-run abnormal stock returns. Leveraged buyback firms have more debt capacity, higher marginal tax rate, lower excess cash and lower growth prospects ex ante, increase leverage and reduce investments more sharply ex post than cash-financed buyback firms. Firms that are over-levered ex-ante are associated with lower returns and real investments following leveraged buybacks. The lower announcement returns of over-levered firms are concentrated on firms with weaker corporate governance. The evidence is consistent with leveraged buybacks enabling firms to optimize their leverage, on average benefiting shareholders. The benefits decrease with a firm’s leverage ex ante.
Item Type: | Journal Article | ||||||||||
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Subjects: | H Social Sciences > HG Finance H Social Sciences > HJ Public Finance |
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Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Debt equity conversion , Debt-for-nature swaps | ||||||||||
Journal or Publication Title: | Journal of Corporate Finance | ||||||||||
Publisher: | Elsevier Science BV | ||||||||||
ISSN: | 0929-1199 | ||||||||||
Official Date: | August 2016 | ||||||||||
Dates: |
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Volume: | 39 | ||||||||||
Page Range: | pp. 242-262 | ||||||||||
DOI: | 10.1016/j.jcorpfin.2016.04.004 | ||||||||||
Status: | Peer Reviewed | ||||||||||
Publication Status: | Published | ||||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||||
Date of first compliant deposit: | 22 April 2016 | ||||||||||
Date of first compliant Open Access: | 30 November 2017 | ||||||||||
Adapted As: |
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