NDLI: Controlling shareholders’ opportunistic use of share repurchases

Content Provider	Springer Nature Link
Author	Kim, Hyo Jin Jo, Hoje Yoon, Soon Suk
Copyright Year	2012
Abstract	This study examines how share repurchase and dividend policies are influenced by controlling shareholders in an emerging market. We maintain that the controlling shareholders can utilize share repurchase opportunistically, particularly when they exercise voting rights in excess of cash-flow rights. The evidence of Korean firms suggests that the wedge between the voting rights and cash-flow rights positively affects share repurchases but negatively affects cash dividends. We also find that share repurchases are not always supported by operating performances. The results indicate that firms may utilize share repurchases as a means to pursue private benefits of the controlling shareholders. We also document that share repurchases do not substitute for cash dividends, suggesting that share repurchases are not genuine distributions. Furthermore, we find that the wedge of share repurchases reduces firm value. Overall, our results indicate that the controlling shareholders of Korean firms use share repurchases opportunistically rather than strategically.
Starting Page	203
Ending Page	224
Page Count	22
File Format	PDF
ISSN	0924865X
Journal	Review of Quantitative Finance and Accounting
Volume Number	41
Issue Number	2
e-ISSN	15737179
Language	English
Publisher	Springer US
Publisher Date	2012-09-12
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Controlling shareholders Share repurchases Dividends Wedge Cash-flow rights Voting rights Finance/Investment/Banking Accounting/Auditing Econometrics Operations Research/Decision Theory
Content Type	Text
Resource Type	Article
Subject	Finance Accounting

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