Buybacks versus Ordinary Dividends: Marginal Investor Reactions to Cash-return Announcements

Warwick Anderson () and Samuel McLaughlin
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Warwick Anderson: University of Canterbury, https://www.canterbury.ac.nz

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: This paper examines the stock price effect in New Zealand of announcements of increases in dividends and of share repurchases from 1993 to 2009. The results are related to the soft substitution hypothesis on Australian data. Dividend-increase announcements provoke a greater positive effect on the stock price than buyback announcements. The preference of the marginal investor is also examined when firms distribute cash through both mechanisms. Again, investors prefer dividend increases over repurchases, and do so to a greater degree than for firms that only use one form of distribution.

Keywords: Event Study; Dividends; Stock Repurchases; Abnormal Returns (search for similar items in EconPapers)
JEL-codes: G14 G35 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2013-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:13/03

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