Share Repurchase Motives by Taiwanese Firms

August 16, 2013 Leave a comment

Share Repurchase Motives by Taiwanese Firms

Shih-Chin Lee Chihlee Institute of Technology

Jen-Chang Liu Takming University of Science and Technology – Department of Banking and Finance

March 27, 2013

Abstract: 
Taiwanese firms must follow strict regulations when implementing repurchase programs. The mean (median) of completion rates is 69.2% (82.7%) for the purpose of cancelling and 68.0% (80.0%) for the purpose of transferring. We try to identify the factors determining the completion rate of a repurchaser. We find that OTC firms tend to be younger and are on the stage of expansion; hence they are less likely to write off its shares. In contrast, TSE firms are more mature and are more ready to cancel the shares when they decide to buy back shares. Besides, a repurchaser is characterized by higher ratio retained earning to total equity, lower leverage. There exist a complementary relation between dividends and repurchases. It is highly unlikely to find a firm buying back shares without history of paying dividends. Finally, we find no evidence supporting the free cash flows hypothesis; that is, the ratio of cash to total assets has no association with the repurchase decision.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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