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On-market share buybacks in Australia: Disclosure, transparency and regulation
Christine Brown1 Monash University
John Handley University of Melbourne
Asjeet S. Lamba University of Melbourne
1 [email protected]; [email protected]; [email protected]. This research has been funded under the Australian Research Council’s Discovery Project funding scheme (project number DP0878537). We thank Anne Ritter for her excellent and diligent research assistance, and Kevin Davis for helpful comments. We are grateful to Julie Dang from the ASX for insights into ASX procedures.
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On-market share buybacks in Australia: Disclosure, transparency and regulation
Abstract This study investigates listed company compliance with the Australian Securities Exchange (ASX) Listing Rules, during the conduct of on-market (open-market) share repurchases, over the period 1997 to 2013. Australia provides a very transparent reporting regime, where as well as announcing the open and close of the buyback to the ASX, companies are required to make daily reports on their on-market buyback activity before the open of trade on the next business day. Important features of the Listing Rules protect market integrity and safeguard investors against companies transacting at artificially created prices. Using a dataset of 38,541 daily observations, we find a high level of compliance, with around 99 percent or more of the company transactions compliant with the price rules. However, companies are not always timely with their disclosure. Only 69 percent of disclosures occur within the required 30 minutes or more period before the start of trading on the next business day.
Keywords: On-market buybacks; Australia; regulatory regime; compliance. JEL Classification: G18, G30, G32, G35.
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1. Introduction
US studies of company behaviour during the buyback period rely on survey evidence (Cook,
Krigman and Leach, 2003) and more recently monthly data (Dittmar and Field, 2014). Companies
in Australia are required by the Australian Securities Exchange to report any on-market repurchase
activity at least half an hour before the start of trade on the next business day. This study uses the
daily buyback activity data reported by Australian companies to study company behaviour and
compliance with the regulations. The information reported includes the low, high and average
price paid by the company on that day. This rich dataset consists of 38,541 daily observations and
provides a full sample of domestic company on-market repurchase activity in Australia over the
period 1997 to 2013.2 During this period there were 993 on-market buybacks announced with 493
unique companies completing on-market buybacks with total value around $39.9 billion.3
The history of repurchases in Australia is relatively short because they were prohibited until 1989
and then heavily regulated until 1995 with the result that few companies repurchased shares before
1996. Following the implementation of the First Corporate Law Simplification Bill in December
1995 the growth in repurchases in Australia escalated. Companies can elect to repurchase shares
off-market through an invitation to shareholders to tender shares back to the company, or they can
repurchase shares in the ordinary course of trading on the stock exchange. The latter are known
as on-market share buybacks and are the focus of this paper.4
Although on-market buybacks have become an important mechanism in Australia for returning
cash to shareholders there have been few studies investigating whether the existing stock exchange
listing rules provide adequate protection for shareholders. Because companies possess inside
information regarding the true value of the shares they may have an advantage over outsiders
when repurchasing company shares. Early studies such as Mitchell and Robinson (1999) and
Mitchell et al. (2001) focused on firms’ motivations for undertaking buybacks using a survey
methodology. In a more recent study, Holub and Mitchell (2012) document firm disclosure in
initial and final buyback announcements. However they do not examine firm compliance with the
2 There were few buybacks in 1996 and company compliance with the regulations and reporting was patchy. To
avoid potentially contaminating our results we commenced our sample in 1997. 3 All amounts are in Australian dollars. There are 2183 companies listed on the ASX as at 5th October 2015. 4 Hereafter all reference to repurchases or buybacks will refer to on-market activity unless explicitly stated
otherwise. Off-market repurchases are fewer in number and are also economically important in Australia but are not studied in this paper.
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daily reporting requirements under ASX Listing Rules. We fill this gap by examining whether
companies comply with the regulatory requirements governing company behaviour when they are
actually active in the market buying back shares. In particular, it is important to document
company compliance with the listing rule that governs minimum trading before the company can
enter the market to purchase shares, and the rule that sets a maximum price at which the company
can transact. These rules protect shareholders, investors and support market integrity.
It is not clear whether shareholders generally understand on-market share buybacks and their
potential consequences. If the company is purchasing undervalued shares then the result is a
wealth transfer from selling shareholders to those that do not sell. To protect selling shareholders,
and also to guide and police company behaviour during the buyback so as to ensure the regulatory
objectives of orderly market and market integrity, there are a number of rules and regulations
governing on-market buybacks in most markets globally (IOSCO, 2004). Australia is no exception.
The legal requirements of share buybacks in Australia are currently contained in the Corporations
Act 2001, and company conduct during the repurchase is constrained by ASX Listing Rules 3.8A,
7.29 and 7.33.
ASX Listing Rule 3.8A governs the requirements for companies to make an initial announcement,
a final announcement and also notify any changes to buyback parameters during the repurchase
period. Company compliance with disclosure requirements for the initial announcement of an on-
market buyback has been found to be reasonable, but is poor for final buyback notices (Holub and
Mitchell, 2012). Despite good disclosure when the firm announces its intention to repurchase
shares, selling shareholders may still be completely unaware that the opposite party to the
transaction is the company. In addition to the disclosure requirements, a number of ASX Listing
Rules govern company behaviour in the market during the buyback period. The objective of these
rules is to protect creditors and shareholders and ensure that companies undertaking buybacks are
not putting their solvency at risk, are treating shareholders equitably and are disclosing all relevant
information to the market. Australia provides a unique environment to study company compliance
with the Listing Rules because companies must disclose on a daily basis any previous day’s
repurchasing activities.
The first objective of this paper is to document in detail the on-market buyback activity of
Australian companies from 1997 to 2013. The second and important objective is to investigate the
extent to which companies comply with the prescribed listing rules governing company behaviour
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during the on-market repurchase period. The first rule (Listing Rule 7.29 – the minimum trading
rule) stipulates that a company can repurchase shares only if there has been at least five days of
positive trading volume in the three months prior to the date of repurchase. The second rule
(Listing Rule 7.33 – the maximum price rule) provides that the company may buy back shares on-
market at a price which is no greater than 5% above the average of the closing prices over the
previous five days on which trading occurred in the company’s shares. We use data provided by
companies’ daily reporting of buyback activity to investigate company compliance with these two
listing rules.
We find high compliance rates with both Listing Rule 7.29 and Listing Rule 7.33. Of the 38,541
observations of company daily reports the compliance rate for Listing Rule 7.29 is 99.8 percent
and that for Listing Rule 7.33 is 98.9 percent. Listing Rule 7.33 protects the market against the
company creating artificially high prices for the shares. This is in the interest of market integrity,
efficient prices and reduces the need for regulatory oversight of company transactions. However,
companies are not as diligent in reporting their activities within the required time limits. We find
only 69 percent of companies have reported their activities within half an hour of the market
opening on the next business day, as required. However, by the end of the trading day 90 percent
of companies have reported their previous day’s buyback activity.
The remainder of this paper is organised as follows. Section 2 provides a summary of the
regulation of on-market share buybacks in Australia and includes relevant comparisons to
regulation in other countries. Section 3 provides information on the data examined while Section
4 presents our findings. Section 5 concludes the paper.
2. Regulation of on-market buybacks 2.1 Regulations around the globe On-market buybacks have become an important mechanism for cash distribution and capital
structure management around the world. Managers implementing buyback programs on-market
are insiders and may therefore have information that selling shareholders do not have access to.
Consequently in most jurisdictions repurchase activities of companies are regulated.
Kim et al, (2004) and IOSCO (2004) compare repurchase regulations across a number of countries.
Generally regulations include rules regarding whether permission must be sought at a
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shareholder’s meeting, whether there is a time limit on the expiration date once approval is given,
whether there is a limit on the percentage of shares outstanding that can be bought under the
buyback, any timing restrictions on actual trading by the company, public disclosure rules, and
whether there are restrictions on the company repurchasing shares during information-sensitive
events such as earnings announcements. The specific nature of the regulations varies from country
to country.
In the U.S., SEC Rule 10b-18 as enacted in 1982 provided an issuer with a “safe harbor” from
liability for manipulation under the Securities Exchange Act of 1934. Up until 2004 US firms
could undertake a repurchase without prior announcement and could announce a repurchase and
not buy back any shares. Overcoming the lack of publicly available data, Cook, Krigman and
Leach (2003) conduct a survey of repurchasing companies and find that only 2 out of 54 firms
were in compliance with all of the Rule 10b-18 guidelines. In December 2003 the SEC adopted
amendments to the rules governing repurchases and required companies to disclose all repurchases.
The new disclosure rules require companies to disclose their repurchase activity quarterly. 5
In France, Canada, Japan and Italy companies are required to report their repurchase activity on a
monthly basis (IOSCO, 2004). Ginglinger and Hamon (2009) examine a sample of 806 repurchase
programs on the Paris Stock Exchange over 2000 to 2002. Companies are constrained by
regulations to purchase no more than 25 percent of the trading volume on any trading day and
must not trade in the period 15 days before an earnings announcement. They find that the smallest
and least liquid firms frequently violate the volume rule, and 70 percent of companies in the
sample repurchased shares at least once in the prohibited trading window prior to earnings
announcements. Companies buying shares in the prohibited period before earnings
announcements had the most detrimental effect on selling shareholders.
The legal and regulatory environment in Hong Kong most closely resembles that of Australia. On-
market repurchases are restricted to less than 10 percent of shares outstanding at the time approval
is given and in any given month the company can buy back no more than 25% of the volume
recorded for the previous month. Companies are prohibited from buying back shares during
5 Under the amendments, issuers are required to disclose, among other things, the total number of shares repurchased during the past quarter, the average price paid per share, the number of shares that were purchased as part of a publicly announced repurchase plan, and the maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs.
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information-sensitive events, at least until that information is made public. The Hong Kong Stock
Exchange requires companies to disclose on a daily basis (and prior to the start of trade on the
next business day) details of the company’s repurchase activities for the previous day. The
exchange then aggregates the daily data and releases the information to data vendors, who release
the information at or around the start of trading (Brockman and Chung, 2001).
2.2 The Australian regulatory environment
The legal requirements of share buybacks in Australia are currently contained in the Corporations
Act 2001, and company conduct during an on-market repurchase is governed by ASX Listing
Rules 3.8A, 7.29 and 7.33. The consequences of this legal framework can be summarised as
follows. A company may buy back up to 10% of its voting shares in any 12 month period without
seeking shareholder approval. This is referred to as the 10/12 limit, and is defined in sections
257B(4) and 257B(5) of the Corporations Act 2001. A buy back is an on-market buy back if it
results from an offer made by a listed corporation in the ordinary course of trading on a prescribed
financial market (s257B(6)).
The disclosure regime in Australia for companies undertaking an on-market buyback is
transparent, enabling a comprehensive study of compliance with the regulatory framework.
Companies must lodge a Form 281 (“Notice of intention to carry out a share buyback”) with the
Australian Securities and Investment Commission (ASIC) at least 14 days before the
commencement of the buyback. Companies must publicly announce an on-market buyback and
they are required to lodge an announcement notice (called an Appendix 3C) with the ASX.
Included in the announcement notice is the name of the broker (or joint brokers) who will act for
the company. A company must not dispose of shares it buys back and the shares are automatically
cancelled when the transfer to the company is registered. (s257H(2), s257H(3)). In addition ASIC
must be notified of the cancellation of shares using Form 484 “Change to company details”.6 Any
changes to the buyback, including for example a change of broker, must be notified to the ASX
through the lodgement of an Appendix 3D form.
6 Under Section 254Y of The Corporations Act a company must lodge a notice detailing the number of shares
cancelled, the total amount paid by the company and the class of shares cancelled, with ASIC within one month of the cancellation of the shares. The company must lodge the notice with the ASX at the same time as it lodges the information with ASIC. Any changes to the original terms of the buyback are notified using Appendix 3D.
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Australian regulation is similar to that in Hong Kong (Brockman and Chung, 2001) in that the
continuous disclosure requirements imply that companies must make a daily statement to the ASX
of any buyback activity on the previous day. Under Listing Rule 3.8A a company undertaking an
on-market buyback must lodge a daily notification (called an Appendix 3E) at least half an hour
before the start of trading on the business day after which any shares are repurchased. Companies
may repurchase shares only if transactions in the company’s shares were recorded on the ASX at
least 5 days in the three months before it repurchases the shares (Listing Rule 7.29, the “minimum
trading rule”). Another important feature of this disclosure environment is ASX Listing Rule 7.33,
the “maximum price rule” rule, pursuant to which a company may only buy back shares under an
on-market buy-back at a price which is not more than 5% above the average of the closing market
price for securities in that class, where the average is calculated over the last 5 days on which sales
in the shares were recorded before the day on which the purchase under the buyback was made.7
See the Appendix for a full statement of these Listing Rules.
Companies are now required to use the ASX on-line portal for electronic lodgement of the required
documents. The market announcement team reviews the document, classifies the announcement
and then it is released to the market usually within a minute of its arrival in the portal. The
responsibility for ensuring that ASX has adequate arrangements for monitoring and enforcing
compliance with the Listing Rules resides primarily with the Listings Unit in ASX Compliance.
The compliance team follows up with an entity if it does not provide timely lodgement of required
documents. However, the Listing Rules are not law and the sanctions available to the ASX for an
entity that breaches the Listing Rules are suspension of trading in its securities or the ultimate
sanction of termination of its listing on the ASX.
One explanation of a company’s motivation for repurchasing shares is the information/signalling
hypothesis with its roots in the information asymmetries that exist between managers and
outsiders. Managers can use a repurchase announcement to signal to the market that its shares are
undervalued. The positive abnormal returns observed on announcement of a buyback (Dann
(1981), Vermaelen (1981), Comment and Jarrell (1991), and Peyer and Vermaelen, (2009) in the
U.S. and Lamba and Ramsay (2005) and Mitchell and Dharmawan (2007) in Australia) are
generally viewed as consistent with this hypothesis.
7 Note that a “volume-weighted average price” version of this rule was introduced in July 2014, but does not affect our sample.
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Of course, once the market has reacted to the announcement and the share price has adjusted to
the new information, then the company can repurchase the shares at a price below the fair market
price only if it can time the market (Rau and Vermaelen, 2002; Brockman and Chung, 2001). An
efficient market may respond instantaneously to the announcement of a buyback, making the
purchase of undervalued shares a difficult investment strategy for the company. But in many cases
on-market buybacks continue over an extended time period, and the company, as an insider, may
use the opportunity to manipulate the share price. Although under the ASX Listing Rules
buybacks may be of unlimited duration, under ASIC Regulatory Guide 110 (enacted in July 2007)
the company must announce a start- and end-date for the on-market buyback. The company can
repurchase shares for up to 12 months; after 12 months a fresh notice is required (ASIC Regulatory
Guide 110 RG 110.26 to 110.30). The company must commence repurchasing shares within two
months of the announcement or a new announcement with accompanying required documents is
required (ASIC Regulatory Guide 110 RG 110.31to 110.34).
Holub and Mitchell (2012) provide a comprehensive overview of the history of the Corporations
Law and the ASX Listing Rules pertaining to on-market buybacks. They find reasonable
compliance with the disclosure requirements for the initial announcement of an on-market
buyback, but disclosure in the appropriate ASX notice is provided in only 53 percent of cases for
the final notice. However the announcement of a buyback does not provide information to the
market of when the company is actually buying back its shares; in fact uninformed selling
shareholders may be completely unaware of the possibility that the company is the opposite party
to the transaction as the announcement of the buyback could have occurred sometime before.
Holub and Mitchell (2012) suggest that the continuous disclosure requirements embedded in the
adherence to Listing Rule 3.8A are unnecessary and recommend policy changes to lessen those
disclosure requirements to quarterly, more in line with regulations in the U.S.
We take a contrary position and argue that the continuous disclosure requirements provide
substantial protection to investors and enhance market integrity during the conduct of the buyback.
One role of the exchange is to provide information to the market, and the ASX expends
considerable resources ensuring compliance with its rules and the timely release of continuous
disclosure information. In this capacity daily notifications are useful to market participants
wanting to know company buyback activities once the buyback has been announced. Specifically,
because on-market buybacks may give rise to price distortions when the company is actively
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purchasing, more frequent disclosure by the company is better. Shareholders selling into such
buybacks are at a substantial information disadvantage which may allow the company to exploit
them in favour of the remaining (or non-selling) shareholders. Although on-market buybacks have
become an important mechanism in Australia for some companies to return cash to shareholders,8
and have the potential to affect the orderliness and integrity of the market, there have been no
studies investigating whether companies actually comply with the continuous disclosure
requirements (Listing Rule 3.8A).
As well as investigating company compliance with the continuous disclosure rules we examine
company compliance with Listing Rules 7.29 and 7.33. Listing Rule 7.29 requires that
repurchasing companies must have positive trading volumes (on exchange) before they can
commence a buyback. This provides some assurance to shareholders that they will be selling at
‘market’ prices when the company is the opposite party to the transaction. The main intention of
the maximum price rule (Listing Rule 7.33) is to protect investors because it restricts companies
from using share buybacks as a means to artificially inflate share prices. While companies may
wish to provide liquidity in periods of selling pressure, they may do so only at prices that satisfy
this rule.
A significant development in global equity markets, including Australia, has been a growing
awareness of the importance of off-market trading. A relatively large percentage of trades in shares,
including smaller trades, occur off-market in so-called ‘dark pools’ (estimated to be around 25
percent in Australia (ASIC, 2013). Around 20 broker-operated crossing-systems are registered
with the market regulator ASIC. The outcome of off-market trading is a lack of pre-trade
transparency, because these trades are arranged outside the limit order book. The effect for larger
block trades is to make the market more efficient, but these off-market trades harm the price
discovery process for smaller trades (Comerton-Forde and Putnins, 2013). However, ASX Market
Rule 20.9.1 (introduced 28/11/05) prohibits special crossings of any cash market products of an
issuer during the term of an on-market buyback conducted by the issuer, implying that the
company and all other investors must transact in the shares on-market during the duration of the
buyback, thus protecting pre-trade transparency during the period where the company is
potentially in the market trading its own shares.
8 Brown, Handley and O’Day report that the cash distributed by companies repurchasing shares over the period 1996 to 2009 via both on-and off-market repurchases is comparable to that distributed via dividends, but that only a small percentage of listed companies are active repurchasers.
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3. Data and sample statistics
We use data from several sources to construct a comprehensive database for all ASX repurchases
beginning in 1997 and continuing until December 2013. 9 The Morningstar DatAnalysis
Imagesignal service is used to identify all initial buyback announcements. We use the
announcements file of the Securities Industry Research Centre of Asia-Pacific (SIRCA) to extract
information from company announcements for all on-market buybacks over the period 1997 to
2013. The SIRCA announcement files are in both pdf and text format. The information in the text
files enables construction of a database with details for every daily announcement provided by
companies undertaking on-market repurchases over the period from 1997 to 2013. The ASX daily
trade data used for this study is sourced from SIRCA. We are interested only in repurchases of
ordinary shares by Australian (domestic) companies listed on the ASX. Our sample therefore
differs from that of Holub and Mitchell (2012) who investigate buybacks for both domestic and
foreign companies listed on the ASX over 2000 to 2009.
The lodgement of the Appendix 3E form (described in Section 2.2 above) is used to document for
each announcing company the days on which the company was present in the market buying back
ordinary shares. Included in the record of the company’s daily notification to the stock exchange
of repurchasing activity are details of the time at which the Appendix 3E form is lodged. The
company supplies information including the number of shares bought back, the total consideration
paid for the shares, the highest, lowest and average prices paid for the shares during the day and
the company’s own calculation of the maximum price allowed under Listing Rule 7.29. We
manually check the integrity of the individual entries in the database that is built up from these
daily notifications. We are able to build a running tally of shares repurchased throughout the
buyback period using this information, and also to ensure that the tallies are internally consistent
for each company. At the expiration of each buyback, the total of all shares repurchased calculated
from the daily notices must match the final buyback notice.10 In this way we are confident of the
integrity of the data because we are able to correct any obvious data entry mistakes that the
company has made when filling out the Appendix 3E form.
Whilst all the data are available electronically, the data has been painstakingly manually checked.
Table 1 contains a summary of the filtering rules applied and provides labels for the various
9 We use actual repurchases; companies announcing repurchases which do not subsequently repurchase are not included in the sample. 10 We check against the Appendix 3F if that has been lodged.
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samples used later in this study. Company supplied information on shares repurchased is matched
in the first instance by volume and price. There are observations where an Appendix 3E has been
lodged but which cannot be matched to a purchase date. In addition, there are observations where
a company reports data that could not be matched with volumes recorded in SIRCA for a particular
date. For example, there are instances where the company reports a number of shares bought back
that is greater than the total volume for the day, and in addition that cannot be matched with any
other day around that date. In these cases the observation is placed in the unmatched sample. In
total there are 56 observations in the unmatched sample, including 10 off-market trades. There are
216 observations where no Appendix 3E was lodged, but where the buybacks can be manually
matched to a purchase date. As documented in Table 1 Sample 1 is the raw data sample and
consists of 38,541 daily observations representing all buyback activity from 1997 to 2013. Sample
2 consolidates multiple records where the buyback number and purchase date are the same and
consists of 38,253 observations. Sample 3 has the unmatched observations removed and any
duplicate reports of shares bought back for the same date are consolidated and consists of 38,194
observations.
[Insert Table 1 around here]
Figure 1 plots the total dollar value of shares repurchased through on-market buybacks for each
calendar year over the sample period (left-hand axis) and the number of repurchase programs
announced each calendar year (right-hand axis). There are a couple of preliminary observations
from Figure 1 that will be explored in more detail in sub-sample analysis in Section 4. The number
of repurchase programs reached a peak in 2008; however the dollar value peaked earlier in 2007.
Although the Australian economy emerged from the liquidity and credit crunch of 2007-08
(Brunnermeier, 2009) relatively unscathed, there was a substantial correction in the equity market.
The Australian share market peaked in November 2007 and by the end of December 2008 had
dropped around 45 percent. The drop in the dollar value of shares repurchased from 2007
($5,886m) to 2008 ($1,763m) partly reflects the devaluation in the equity market. Casual
observation of the number of the number of on-market buybacks in 2008 suggests that companies
may have been opportunistically repurchasing undervalued shares in 2008, or that they were
engaging in price support to a greater extent than in other periods. Such an observation is
consistent with survey results of Graham, Harvey and Michaely (2005) in which financial
executives state that they repurchase when the shares represent good value relative to fundamental
or true value.
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[Insert Figure 1 around here]
Table 2 records the summary statistics of the on-market repurchasing activity, and contains the
statistics for the 993 buybacks in the sample (labelled the ‘summary’ sample in Table 1). As shown
in Table 2 and also in Figure 1 the number and value of repurchases varies considerably over the
sample period. Table 2 gives details of the number of buybacks announced in each calendar year
(column 2) and the number of unique companies announcing buybacks each calendar year
(column 3). In column 4 the number of buybacks active in each calendar year are reported while
the number of unique companies actively buying back each calendar year is recorded in column
5. Because buybacks can straddle calendar years, and because companies may announce a
repurchase in one calendar year and not commence until the following year, the entries in Column
2 may be equal to or greater or less than those in column 4. Column 6 (7) records the average
(median) length in trading days of buybacks over each calendar year and column 8 (9) records the
average (median) shares repurchased as a percentage of shares outstanding. The last column
records the total consideration paid for repurchases over each calendar year.
[Insert Table 2 around here]
The average number of shares repurchased as a percentage of the total shares outstanding reported
in Table 2 is similar to that reported by Holub and Mitchell (2012) for ordinary shares repurchased
by domestic companies. The mean percentage of shares repurchased is 3.44 percent for the sample.
To get some sense of the distribution of repurchases we split the sample into the top, middle and
bottom one-third in terms of the dollar size of the buyback. Figure 2 shows the distribution for
each tercile of 331 observations. Figure 2A gives the distribution of the largest buybacks with
consideration paid ranging from a low of $5.04m to a high of $2,813m, with almost 100 buybacks
with consideration between $5m and $10m. In this category there are 7 buybacks which have
repurchase amounts greater than $1b. Figure 2B contains the distribution for buybacks with
consideration between $0.647m and $4.993m. Figure 2C gives the distribution of small buybacks
with consideration from a low of $441 to a maximum of $0.647m, and illustrates the fact that there
are a large number of very small buybacks.
[Insert Figure 2 around here]
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Summarising the on-market repurchasing activities of the companies in the sample, the typical
repurchasing firm enters the market on around 39 days with each repurchase, buying back over
the entire repurchase period around 8.3 million shares or on average 3.4 percent of outstanding
shares for total consideration on average of approximately $39 million. Almost 20 percent of the
sample firms repurchase five or fewer times during the buyback, while almost 25 percent of the
sample firms repurchase more than 50 times during the course of the buyback. Figure 3A gives
the distribution of the number of days on which the firm is actively repurchasing shares in each
buyback.
The continuous disclosure regime requires companies to lodge the Appendix 3E notification half
an hour before the open of trade on the next business day. Our argument that this increases market
integrity has greater credence if the daily lodgement actually sends a credible signal to the market
regarding company presence in the market. To investigate this we calculate the gap (number of
trading days) between dates on which the company is present in the market actively buying shares.
Using Sample 3 (38,194 observations) there are 25,176 observations where the company is in the
market on two successive trading days. This implies that when a company reports its activity on
the next business day there is a 67 percent11 chance of it repurchasing shares on the day that it
lodges the Appendix 3E.
4. Empirical results and discussion
The institutional framework in which Australian companies undertake on-market buybacks
provides a very transparent regime and after careful manual compilation of the data, results in a
database that enables a thorough investigation of the extent to which companies adhere to the ASX
Listing Rules. The primary purpose of this study is to use this dataset to examine whether
Australian companies are complying with the regulations. We therefore perform this analysis on
the full data set, Sample 1, because the filtering process identified in Table 1 removes some of the
non-compliant observations, which need to be counted in our statistics for non-compliance.
For all 993 identifiable buybacks we first check compliance with the lodgement of Appendix 3C
and 3F forms, required under Listing Rule 3.8A, which respectively signal the start and close of
the buyback to the market. The compliance rate with lodging Appendix 3C (3F) is 98.6 percent
11 There are 38,194 observations in sample 3, with 993 of these the first date on which the company purchases. There are thus 37,201 observations of the gap between active purchasing days.
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(65.6 percent). These figures compare with those reported by Holub and Mitchell (2012) of 98
percent and 53 percent respectively over the period 2000 to 2009. From 1st September 1999, when
the new set of ASX Appendices 3C, 3D, 3E, 3F replaced the old Appendices 7C, 7D, 7E and 7F,
on-markets buybacks have been allowed to be of unlimited duration.12 Under the new rules the
Appendix 3F should be lodged when the company has bought back the maximum number of
shares it wanted, or if it decides it will stop buying back shares (see the Appendix). Of the 993
buybacks in the sample there are 342 (around 34 percent of the total) instances where the company
did not lodge an Appendix 3F; Figure 4A plots the distribution of active repurchase days for these
buybacks, while Figure 4B plots the distribution for companies that are compliant with lodging
the final notice. There does not appear to be any apparent reason in terms of the length of the
buyback as to why companies fail to lodge the final notice. It may simply be that companies have
not conclusively decided that the buyback has ended and therefore do not lodge the final notice.
We next investigate whether companies comply with Listing Rule 3.8A which requires them to
lodge Appendix 3E at least thirty minutes before the start of trade on the next business day after
the date of any repurchase activity. Trading on the ASX starts at 10.00 am. Table 3 reports the
results of these tests. Using the time of lodgement of Appendix 3E we find 12,068 breaches for
the full sample, reflecting the number of lodgements of Appendix 3E that occur after 9.30am on
the business day immediately after the company trades occurred. Of these, 7887 have not been
lodged by 10.00 am, 5361 have not been lodged by midday and 3914 have still not been lodged
by the end of the day. For the full sample, of the 38,541 lodgements of Appendix 3E 68.7 percent
comply with Listing Rule 3.8A by occurring at least 30 minutes before the start of trade on the
next business day. For large (small) companies this figure is 71.1 (54.0) percent. 13
[Insert Table 3 around here]
There is no discernible pattern in the compliance rates over time. Companies execute their
purchases through one or two designated brokers; brokers are identified in the Appendix 3C form.
The broker’s executed trades are notified to the company typically at the end of the trading day
and then the company must lodge through the ASX on-line portal the details of the day’s
repurchases. Unless the broker has the authority to lodge the Appendix 3E (which does not appear
to be the case for most companies), there is a delay between the actual trades and the company
12 Although as previously noted ASIC requires companies to lodge a form to extend the buyback after 12 months. 13 We split the sample into large (small) firms where the size of the firm is greater (smaller) than the median market capitalisation for all firms listed on the ASX in the month prior to the announcement of the buyback. Tests of compliance are run on the large and small firm sample separately, but are not tabulated.
16
being notified of the details of the trades. Hence to lodge the details of the trades 30 minutes before
the start of trade on the next business day as required under Listing Rule 3.8A will be difficult if
the broker does not report the trades to the company in a timely fashion. It is arguably more
difficult for smaller companies to comply because they may not necessarily have dedicated
treasury staff to lodge the Appendix 3E forms.
We integrate the daily repurchasing activity with daily closing prices for all repurchasing
companies on all trading days over the period of each buyback, and for a period three months
before the announcement date of the buyback. Daily volume data three months prior to the day
on which each company repurchases shares is used to document breaches of Listing Rule 7.29.
Recall that in order to buy back shares on-market a company must have had five days in the
previous 3 months in which trading in the company shares occurred. Therefore the filter we apply
is to select the date three months prior to the date that the company first buys back shares, and
record the number of days of positive volumes. It is clear that in the context of Listing Rule 7.29
it is particularly important that the company complies with Rule 7.29 the first time it repurchases
shares for an announced buyback, because the potential for creating an artificially inflated price
through the company’s actions is greater if this condition does not hold. For this analysis we use
Sample 3 consisting of 38,194 daily observations and find 66 breaches of Listing Rule 7.29 as
documented in Table 4. The compliance rate with this listing rule is very high (99.8 percent), and
is not unexpected as the compliance hurdle is low. As would be expected, small companies are
more likely to be in breach of this listing rule.
[Insert Table 4 around here]
The intention of Listing Rule 7.33 is to prevent companies from artificially inflating share prices
through transacting at prices above fundamental value or providing price support at unrealistic
prices in a falling market. The sample period in this study includes the downturn in the Australian
equity market as a result of the 2007-08 liquidity and credit crunch. From the All Ordinaries Index
daily price series we identify 1st November 2007 as a high point of the market (Index Value =
6853.6) and 23rd January 2009 as a low point (3300.3).
Using daily prices we calculate the price which is equal to the average of the recorded closing
prices over the previous five days on which sales are recorded plus 5% - the “maximum price”
designated in ASX Listing Rule 7.33. To make this explicit let this price be designated as M. Then
1.05 (Averageof last 5day's (on which sales are recorded) closing prices)M = ×
17
The company does not report the actual prices at which it buys back shares, rather the low, high,
and average price at which it repurchased shares each day are reported on the Appendix 3E form.
We designate these low and high prices as Plow and Phigh. The company also records on Appendix
3E its calculation of M which we label Mco. However there are 4690 of the 38,541 (12.2 percent)
Appendix 3E reports where the company does not record a calculated maximum price. In Table 4
we calculate the average percentage difference between M and Mco for the 33,852 Appendix 3E
reports that record the company’s calculation of the maximum price.
We first compare M and Mco to check for breaches of Listing Rule 7.33. If Plow > M then clearly
the company is in breach of Listing Rule 7.33 for all purchases on that day. If Phigh >M then the
company has breached Rule 7.33 for a portion of the transactions on that day. We also calculate
the extent of the maximum breach by calculating the percentage difference between the two prices
where a breach has occurred:100*(M − Phigh)/M. Table 5 documents the results of this
investigation. Panel A presents the results for the full sample.
[Insert Table 5 around here]
Of the 38,194 daily reports there are 4690 days (12%) on which the company does not report its
calculation of the maximum price (Mco), and 237 days (0.6%) where Phigh is not reported. There
are 326 days where both the maximum price and Phigh are not reported. This provides evidence of
occasions where the company submits the Appendix 3E report without filling out the requested
prices. As reported in Table 5 Panel A, 5.5 (0.88) percent of the remaining observations have a
reported maximum price that is at least 1 (5) percent above the maximum calculated from actual
closing prices. This may not have material consequences if companies buy back shares well below
their stated bound, Mco. Of more importance are the violations of the maximum price rule
calculated using the true value of M. Companies are not fully compliant on the Appendix 3E forms
with stating the value of Phigh, there are 237 instances where the Appendix 3E form does not record
this price. In addition, there are 415 reports where Phigh > M. In other words of the 38,304 usable
daily reports only 1.1 percent of the reports contain days where one or more repurchase trades by
the company have occurred at a price that violates Listing Rule 7.33. The violations are not
economically significant, as Table 5 Panel A shows that half of these violations (0.54% in total)
occur within 1 percent of the required price.
That companies might use on-market repurchases to provide liquidity in severe market downturns
has been noted by Cook, Krigman and Leach (2003). Companies can absorb sell-side pressure to
support a falling stock price through their purchases. Such purchases will be unlikely to violate
18
the maximum price rule in a downward trending market. In order to investigate whether there is
greater price support provided during the downturn in the market resulting from the liquidity and
credit crunch of 2007-08 we investigate the violations of Listing Rule 7.33 that occurred between
November 1st 2007 and 23rd January 2009, the high and low points of the Australian equity market.
Table 5 Panel B shows that there are 4917 daily reports during this period, of which 4,886 have
Phigh recorded. There are 70 (1.4%) where Phigh > M and 0.84% of trades occur at prices that violate
the maximum price rule by more than 1 percent. We report in Panel C that for the non-crisis period
(before 1st November 2007 and after 23rd January 2009) there are 0.50% of trades occurring at
prices that violate the maximum price rule by more than 1 percent. Notwithstanding that the
violations are a small percentage of trades and do not appear to be economically significant, the
percentage of violations that are greater than 1 percent of the maximum price during the crisis is
67 percent higher than the non-crisis period. Using a binomial test, the frequency of violations in
the crisis period greater than 1 percent is statistically significantly different from the non-crisis
period at a one percent level of significance, as shown in Table 5.
6. Conclusions
On-market repurchases by Australian companies occur in a transparent environment where
companies are required to lodge documents announcing the commencement of the repurchase
program, the closure of the program, and all buyback activity must be notified to the ASX at least
half an hour before the open of trade in the next business day. This rich information environment
facilitates the collection of a dataset of 38,541 daily observations with which to investigate
company compliance with the regulatory requirements.
Our findings are as follows. While over 98 percent of firms comply with the requirement to lodge
the Appendix 3C form announcing the firm’s intention to repurchase shares, only around 66
percent comply with lodging the Appendix 3F form which announces the closure of the buyback
to the market. Moreover only around 69 percent of observations comply with the requirement
(Appendix 3E) to disclose any repurchase activity 30 minutes before the start of trade on the next
business day. The inevitable delays between being notified by the firm’s broker of trades occurring
on the company’s behalf and then reporting to the ASX may be a logistic reason for the delay in
lodging daily reports. However, we can think of no reason for companies not reporting the closure
of the buyback, other than speculation that the company’s purchases may just ‘peter out’ and there
is no explicit acknowledgement that the buyback activity has officially stopped.
19
Listing Rules 7.29 and 7.33 provide minimum activity and price rules respectively to protect
market integrity and maintain an orderly market. It is reassuring to note that repurchasing
companies are almost 100 percent compliant with the two listing rules. Rule 7.29 requires there
to be positive volumes on at least 5 days in the three months prior to the company repurchasing.
Companies are 99.8 percent compliant with this rule. Rule 7.33 sets a maximum price at which
companies can transact, to prevent companies from artificially inflating share prices. Over the
whole sample period companies are just under 99 percent compliant with Listing Rule 7.33. Where
there are breaches their economic significance is small with 0.54% of observations being in breach
of the maximum price rule by less than one percent. There is evidence from our analysis that
repurchasing companies provided more price support in the crisis period of 2007-2008, with
breaches of the maximum price rule by more than one percent increasing by 67 percent.
Australia offers a regulatory environment for on-market buyback reporting that is far more
transparent than most jurisdictions around the globe. This paper is the first to thoroughly
investigate company compliance in a regime where companies are required to report daily any on-
market repurchase activity. We have documented a very high level of compliance with the ASX
Listing Rules designed to protect the market and maintain both its orderliness and integrity. This
is reassuring and in line with our view that the daily reporting requirements of on-market buyback
activity are of economic benefit. Further research is needed to explore the extent to which
companies can time the market to the detriment of selling shareholders. Also, in Australia, unlike
in many other markets, there are no restrictions on companies with respect to purchasing shares
around price-sensitive events such as earnings announcements. Whether companies are using
private information to trade to their own advantage around these events is not investigated in this
paper, but could be another fruitful line of research in the future.
20
References ASIC, 2013, Dark liquidity and high frequency trading, Report 331, March 2013, http://download.asic.gov.au/media/1344182/rep331-published-18-March-2013.pdf Brockman, P. and D. Chung, 2001, Managerial timing and corporate liquidity: evidence from actual repurchases, Journal of Financial Economics 61, 417-448. Brown, C., Handley, J. and J. O’Day, 2015, The dividend substitution hypothesis: Australian evidence, Abacus 15, 37-62. Brunnermeier, M., 2009, Deciphering the Liquidity and Credit Crunch 2007–2008, Journal of Economic Perspectives 23, 77–100. Comment, R. and G. Jarrell, The Relative Signalling Power of Dutch-Auction and Fixed-Price Self-Tender Offers and Open-Market Share Repurchases, Journal of Finance, 46, 4, 1243-1271. Cook, D. O., L. Krigman and J. C. Leach, 2003, An analysis of SEC guidelines for executing open market repurchases, Journal of Business 76, 289-315. Cook, D. O., L. Krigman and J. C. Leach, 2004, On the timing and execution of open market repurchases, Review of Financial Studies 17, 463-498. Dann, L. Y., 1981, Common Stock Repurchases: An analysis of returns to bondholders and stockholders, Journal of Financial Economics, 9, 113-138. Dittmar, A., and C. Field, 2015, Can managers time the market? Evidence using repurchase price data. Journal of Financial Economics 115, 261-282. Ginglinger, E. and J. Hamon, 2009, Share repurchase regulations: Do firms play by the rules? International Review of Law and Economics 29, 81-96. Harris, Thomas C., and Ian M. Ramsay, 1995, An empirical investigation of Australian share buy-backs, Australian Journal of Corporate Law 4, 393-416. Holub, M, and J. Mitchell, 2012, On-market share buybacks: ASX disclosure requirements and compliance, Abacus 48, 31-58. Hatakeda, T., and N. Isagawa, 2004, Stock price behavior surrounding stock repurchase announcements: Evidence from Japan, Pacific-Basin Finance Journal 12, 271-90. IOSCO, 2004, Report on “Stock Repurchase Programs”. https://www.iosco.org/library/pubdocs/pdf/IOSCOPD161.pdf Kim, J., R.Schremper, and N. Varaiya, 2005, Open market repurchase regulations: A cross-country examination, Corporate Finance Review 9, 29-38. Lamba, A. S., and I. M. Ramsay, 2005. Comparing share buybacks in highly regulated and less regulated market environments, Australian Journal of Corporate Law 17, 261-280. Mitchell, J. and P. Robinson, 1999, Motivations of Australian Listed Companies Effecting Share Buy-Backs, Abacus, 35, 1, 91-119. Mitchell, J. and G. Dharmawan, 2007, Incentives for on-market buy-backs: Evidence from a transparent buy-back regime, Journal of Corporate Finance 13, 146–69.
21
Mitchell, J., G. Dharmawan. and A. Clarke, 2001, Managements’ views on share buy-backs: an Australian survey, Accounting & Finance, 41, 1&2, 93-129. Peyer, U. and T. Vermaelen, 2009, The nature and persistence of buyback anomalies, Review of Financial Studies 22, 1693-1745.
Rau, P. and T. Vermaelen, 2002, Regulation, Taxes and Share Repurchases in the United Kingdom, Journal of Business, 75, 2, 245-282. Vermaelen, T., 1981, Common Stock Repurchases and Market Signaling - An Empirical Study, Journal of Financial Economics, 9, 139-183.
22
Appendix Table A1 This table documents the ASX Listing Rules relevant to this study.
Listing Rule When the document must be given to the ASX or statement of listing rule
Listing Rule 3.8A: Covers a number of rules regarding lodgement of announcement and final notices (Appendix 3C and 3F respectively), and the daily update of repurchase activities (Appendix 3E).
Appendix 3C: In the case of an on-market buyback immediately the company decides that it wants to buy back shares. Appendix 3F: At least half an hour before the commencement of trading on the business day after any of the following:
• The company buys back the maximum number of shares that it wanted.
• The company decides that it will stop buying back shares. Appendix 3E: At least half an hour before the commencement of trading on the business day after any day on which shares are bought back.
Listing Rule 7.29 A company may only buy shares under an on-market buy-back if transactions in the company’s shares were recorded on the ASX on at least 5 days in the 3 months before it buys back the shares.
Listing Rule 7.33 A company may only buy back shares under an on-market buy-back at a price which is not more than 5% above the average market price for securities in that class calculated over the last 5 days on which sales in the shares were recorded before the day on which the purchase under the buy-back was made.
23
Figure 1
The dollar value of shares repurchased via on-market buybacks in Australia for each calendar year over 1997 to 2013 is the solid line (left-hand axis). The dotted line represents the number of repurchases announced each calendar year (right-hand axis).
0
20
40
60
80
100
120
0.00E+00
1.00E+09
2.00E+09
3.00E+09
4.00E+09
5.00E+09
6.00E+09
7.00E+09
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Num
ber
Dolla
rs
24
Figure 2
We split the sample into the top, middle and bottom one-third in terms of the dollar size of the buyback. Panel A gives the distribution of the largest buybacks with consideration paid ranging from a low of $5.04m to a high of $2,813m, Panel B contains the distribution for buybacks with consideration between $0.647m and $4.993m. Panel C gives the distribution of small buybacks with consideration from a low of $441 to a maximum of $0.647m.
0
20
40
60
80
100
120
10 20 30 40 50 60 70 80 90 100
110
120
130
140
150
160
170
180
190
200
Mor
e
Freq
uenc
y
Range ($millions)
A: Large
010203040506070
5000
00
7500
00
1000
000
1250
000
1500
000
1750
000
2000
000
2250
000
2500
000
2750
000
3000
000
3250
000
3500
000
3750
000
4000
000
4250
000
4500
000
4750
000
5000
000
Mor
e
Freq
uenc
y
range
B: Medium
01020304050607080
3500
0
7000
0
1050
00
1400
00
1750
00
2100
00
2450
00
2800
00
3150
00
3500
00
3850
00
4200
00
4550
00
4900
00
5250
00
5600
00
5950
00
6300
00
6650
00
7000
00
Mor
e
Freq
uenc
y
Range
C: Small
25
Figure 3
This figure shows in Panel A the distribution of the number of active trading days of the 993 buybacks in the sample, and in Panel B the distribution of the gap, that is the number of days that elapse between successive purchase days.
A
B
0
100
200
300
400
500
600
20 40 60 80 100 120 140 160 180 More
Freq
uenc
y
number of days actively repurchased
0
5000
10000
15000
20000
25000
30000
Freq
uenc
y
Days between successive purchase dates
26
Figure 4
This figure plots the distribution of the number of days companies are actively repurchasing shares for each buyback. Figure 4A plots the distribution for companies that did not lodge an Appendix 3F, while Figure 4B provides the plot for companies that were compliant with lodging the final notice.
A
B
0
20
40
60
80
100
120
140
Freq
uenc
y
Number of days actively repurchasing
0
50
100
150
200
250
Freq
uenc
y
Number of days actively repurchasing
27
Table 1
This table documents the filtering applied to the initial raw sample of daily observations in order to arrive at the various sample used in the analysis.
Description Sample Number of observations Total daily observations Sample 1 – raw data
38,541
Appendix 3E exists but observations cannot be matched with market data
Unmatched 56
Buybacks with the same buyback number and same purchase date are rolled together
Sample 2 38,253
Buybacks with different buyback numbers but the same purchase date are consolidated and unmatched data removed
Sample 3 38,194
Constructed from sample 2 and linked to the Appendix 3C/3F forms. This contains the summary of each buyback for each company in the sample.
Summary 993
28
Table 2
This table reports year-by-year sample statistics, calculated for Sample 3, consisting of 38,194 observations.
Year No of Buybacks
announced
Number of
companies
Number of
buybacks running
Number of
companies
MEAN (Length)
MEDIAN (Length)
Mean (Rvol/SO*100)
Median (Rvol/SO*100)
Total consideration
$million
1997 32 20 24 20 92.53 97 2.47 1.63 483 1998 64 56 72 56 94.47 70 3.38 1.64 2135 1999 52 62 75 62 153.75 69 2.79 2.13 1635 2000 51 62 71 61 135.92 76 2.83 1.63 3948 2001 49 66 72 66 136.82 64 3.39 1.61 1162 2002 53 67 77 67 189.19 75 3.75 1.94 2846 2003 45 62 72 63 195.47 121 2.89 1.96 2858 2004 44 56 68 56 182.16 93 6.11 2.14 1134 2005 70 73 90 73 150.10 85 3.57 2.12 2387 2006 63 81 102 83 112.71 88 2.64 1.08 2567 2007 59 74 92 74 157.44 145 3.99 2.55 5886 2008 105 131 145 131 170.87 139 2.93 1.63 1763 2009 67 102 125 102 176.43 122 3.86 2.39 2202 2010 55 83 103 83 141.27 119 5.22 2.83 1566 2011 84 96 120 97 133.52 106 2.97 1.78 2174 2012 55 100 117 100 129.98 106 4.24 1.81 2189 2013 31 56 72 56 38.39 21 1.50 0.58 2138
29
Table 3 This table reports compliance with ASX Listing Rule 3.8A, which requires companies to lodge (on an Appendix 3E form) the previous trading day’s activities before 9.30am on the next business day. Panel A documents statistics for the full sample. Panel B (C) records the statistics for large (small) firms where the size of the firm is greater (smaller) than the median market capitalisation for all firms listed on the ASX in the month prior to the announcement of the buyback.
year count Complied by 9.30
Complied by 10.00
Complied by 12:00
Complied by EOD
Complied by 9.30
(%)
Complied by EOD
(%) Panel A: All companies
1997 335 189 251 280 292 56.4 87.2 1998 1529 801 1012 1223 1325 52.4 86.7 1999 1949 1095 1299 1518 1731 56.2 88.8 2000 2173 1101 1400 1772 1957 50.7 90.1 2001 1809 1116 1341 1507 1634 61.7 90.3 2002 1755 1217 1376 1477 1589 69.3 90.5 2003 1806 1136 1365 1508 1640 62.9 90.8 2004 1311 901 1043 1140 1212 68.7 92.4 2005 2085 1539 1797 1918 1959 73.8 94.0 2006 1959 1341 1597 1734 1777 68.5 90.7 2007 2461 1755 2016 2216 2291 71.3 93.1 2008 4169 2972 3414 3602 3675 71.3 88.2 2009 3177 2361 2712 2806 2841 74.3 89.4 2010 3291 2312 2719 2859 2909 70.3 88.4 2011 3708 2805 3137 3303 3376 75.6 91.0 2012 3326 2484 2753 2855 2916 74.7 87.7 2013 1698 1348 1422 1462 1503 79.4 88.5
Average 68.69% 79.54% 86.09% 89.84% 66.9 89.9 Panel B: Large companies
1997 217 120 167 189 191 55.3 88.0 1998 1204 617 815 1003 1079 51.2 89.6 1999 1766 969 1163 1375 1574 54.9 89.1 2000 1900 928 1223 1589 1743 48.8 91.7 2001 1492 954 1164 1312 1387 63.9 93.0 2002 1550 1155 1312 1396 1435 74.5 92.6 2003 1516 1083 1291 1380 1437 71.4 94.8 2004 1163 831 959 1037 1088 71.5 93.6 2005 1842 1341 1595 1705 1741 72.8 94.5 2006 1689 1193 1428 1532 1561 70.6 92.4 2007 2068 1500 1717 1892 1961 72.5 94.8 2008 3668 2698 3079 3248 3307 73.6 90.2 2009 2769 2111 2425 2500 2522 76.2 91.1 2010 2691 2016 2348 2439 2465 74.9 91.6 2011 3025 2402 2689 2809 2849 79.4 94.2 2012 2934 2313 2550 2614 2660 78.8 90.7 2013 1565 1282 1351 1385 1422 81.9 90.9
Average 71.1% 82.5% 88.9% 92.0% 69.0 91.9
30
year count Complied by 9.30
Complied by 10.00
Complied by 12:00
Complied by EOD
Complied by 9.30
(%)
Complied by EOD
(%) Panel C: Small companies
1997 118 69 84 91 101 58.5 85.6 1998 325 184 197 220 246 56.6 75.7 1999 183 126 136 143 157 68.9 85.8 2000 273 173 177 183 214 63.4 78.4 2001 317 162 177 195 247 51.1 77.9 2002 205 62 64 81 154 30.2 75.1 2003 290 53 74 128 203 18.3 70.0 2004 148 70 84 103 124 47.3 83.8 2005 243 198 202 213 218 81.5 89.7 2006 270 148 169 202 216 54.8 80.0 2007 393 255 299 324 330 64.9 84.0 2008 501 274 335 354 368 54.7 73.5 2009 408 250 287 306 319 61.3 78.2 2010 600 296 371 420 444 49.3 74.0 2011 683 403 448 494 527 59.0 77.2 2012 392 171 203 241 256 43.6 65.3 2013 133 66 71 77 81 49.6 60.9
Average 54.0% 61.6% 68.9% 76.7% 53.7%
31
Table 4
This table reports the number of violations of Listing Rule 7.29 which requires that when companies repurchase for the first time on-market they must have had at least five days in the last three months where positive volumes occurred in the market. We use Sample 3 with 38,194 observations for these calculations.
X= No of days of trading in the past 3 months
4 3 2 1 0 TOTAL
No of violations where there were exactly X days of trading in the past three months
23 18 20 3 2 66
No for large companies 0 2 0 0 0 2 No for small companies 23 16 20 3 2 64
32
Table 5 Violations of the maximum price rule, Listing Rule 7.33. This table records extent to which the company misreports the maximum price under the maximum price rule: 100*(MCo – M)/M and the extent to which the company violates the maximum price rule: 100*(Phigh – M)/M. Panel A presents results for the full sample 1997 to 2013 and Panel B records violations of Listing Rule 7.33 for the crisis period, which is identified as the period from the highest point of the Australian equity market to the lowest point, 1st November 2007 to 23rd January 2009. Panel C reports violations greater than one percent for the non-crisis period (that is,whole sample period with the crisis period removed).
Period Obs Obs with Phigh recorded
> 1.0 (%)
> 5.0 (%)
>10.0 (%)
Panel A Full 38,541 38,304 100*(MCo – M)/M 5.5 0.88 0.40 sample 100*(Phigh – M)/M 0.54 0.13 0.07 Panel B Crisis 4,917 4,886 100*(Phigh – M)/M 0.84 0.16 0.08 period Panel C Non-crisis period
33,568 33,365 100*(Phigh – M)/M 0.50
Difference (non-crisis – crisis) -0.34***