An Examination of the Current Value Impact of a Leveraged Buyback Announcement
AbstractThis research is aimed at studying the impact of a substantial share repurchase financed through debt (known as a Leveraged Buyback) on the value of the stock of a company. Prior research shows evidence of a positive average effect, but factors determining the magnitude of response for an individual company are not well understood. This study focuses on explaining variations in response to a leveraged buyback. The study suggested that shareholders like a LBB when the size of the LBB is small and the principle behind it is to supplement their dividend income. However, in cases when the company announces a substantial LBB the shareholders perceive it as bad news. This is because the shareholders feel that such a major restructuring of the capital structure at the hands of an untrustworthy management would put at risk not only their dividend income, but also their original investment.
How to Cite
Farooqi, M. N. (2004). An Examination of the Current Value Impact of a Leveraged Buyback Announcement. Journal of Comparative International Management, 8(1). Retrieved from https://journals.lib.unb.ca/index.php/JCIM/article/view/457
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