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Voluntary compliance and implied cost of equity capital : evidence from Canadian share repurchase programs

Date

2008

Journal Title

Journal ISSN

Volume Title

Publisher

ORCID

Type

Degree Level

Masters

Abstract

Securities legislation in Canada and around the world does not mandate firms to fulfill announced share repurchase programs. As such, a firm’s repurchase program completion rate can be interpreted as a measure of the firm’s voluntary compliance, which communicates to investors the degree to which the firm is responsible, reliable and makes good faith efforts to fulfill its announced programs. We therefore expect that the voluntary compliance may reduce the riskiness of a firm and thus its cost of capital. In a sample of Canadian repurchase programs announced between 1995 and 2004, surprisingly, we find little evidence to suggest that a significant relationship exists between the firm’s repurchase program completion rate and the cost of equity. We present a number of explanations for this result.

Description

Keywords

voluntary compliance, share repurchases, implied cost of capital

Citation

Degree

Master of Science (M.Sc.)

Department

Finance and Management Science

Program

Finance and Management Science

Part Of

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DOI

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