股票回购：对自由现金流量假说的进一步检验【外文翻译】 .doc

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1、本科毕业论文（设计）外 文 翻 译原文：Stock Repurchases: A Further Test of the Free Cash Flow HypothesisThe free cash flow (overinvestment) hypothesis has been investigated by Lang and Litzenberger (1989) and recently by Howe, He and Kao (1992). Using Tobins Q as a measure of the intensity of overinvestment, Lang and

2、 Litzenberger find evidence supporting the free cash flow theory in relation to cash dividends. Their empirical results are consistent with the hypothesis that dividend changes by overinvesting firms inform stockholders of the firms investment policy rather than signaling positive asymmetric informa

3、tion regarding the firms future profitability. Howe, He and Kao (1992) extend the study of Lang and Litzenberger by examining the free cash flow hypothesis in relation to both tender offers repurchases and specially designed dividends (SDD). Unlike Lang and Litzenberger, however, they find that ther

4、e is no differential announcement effect for high-Q (value-maximizing) and low-Q (overinvesting) firms in relation to either stock repurchases or SDD.Since cash dividends, SDD, and repurchases represent alternative cash disbursement methods, the conflicting results of Lang and Litzenberger and Howe,

5、 He and Kao present an empirical puzzle. To shed light on this puzzle, we partition our sample of firms repurchasing their stock via a self-tender offer into three groups based on the source of the firms free cash flows. Evidence consistent with the free cash flow hypothesis is found.The article is

6、structured as follows: section 2 describes the methodology for determining the source of the free cash flow (overinvestment) problem and competing explanations. Section 3 describes the data. The empirical results are given in section 4. Concluding remarks are presented in section 5. An alternative t

7、est of the signaling theory is presented in the appendix.To clarify the implications of the free cash flow (overinvestment) and signaling theories, denote the value of the firm by V and the invested capital by K. Value maximinization occurs whenever dV/dK = 1. Overinvesting implies that dV/dK 1. Sup

8、pose that a firm ranks its investment projects in terms of profitability, for example, by the expected internal rate of return (IRR). Then dV/dK = 1 implies that at the margin p = R, where p is the firms cost of capital and R is the expected internal rate of return. Such equilibrium dictates how muc

9、h of the firms available resources should be maintained for reinvestment and how much should be distributed to stockholders. Free cash flows are precluded in such equilibrium.Simplicity and without loss of generality, assume a one-period model where the firm invests at and at the firm reinvests and

10、distributes dividends. Consider the following three scenarios:A. At time t (where t ), the agent possesses positive asymmetric information regarding the firms future profitability. This asymmetric information can either be regarding the performance of existing capital or new projects which are execu

11、ted at. The manager signals this positive unknown information to stockholders by repurchasing some of the firms stock (signaling theory).B. During the period t and prior to the stock repurchase, the expected profitability of the firms projects decreases. Namely, the expected IRR curve shifts to the

12、left, where the IRR curve is defined as a demand function for projects ranked by their expected internal rate of return. In this case, the firm decides to contract by reducing its capital expenditures at, and uses the cash flow to repurchase its stock (free cash flow theory).C. There is no change in

13、 the firms IRR curve prior to the repurchase announcement date, but the actual return on its investments executed in the past exceeds the expected return. (This is simply like drawing one observation at random from a given distribution and the observed value exceeds the mean). In this case the firm

14、accumulates free cash flow and repurchases some of its stock (free cash flow theory)In case (A), no significant average risk-adjusted excess returns prior to the repurchase announcement date are expected, but one would expect positive excess returns on the announcement date. Both (B) and (C) may ind

15、uce free cash flow 4 and hence initiate a stock repurchase, but they are diametrically different events. In case (B) an unfavorable event occurs, while in case (C) a favorable event occurs. Thus, while the motive for a stock repurchase under (A) is to signal positive asymmetric information regarding

16、 the firms available projects, the motive for a stock repurchase under(B) and (C) is to revise the firms investment policy.If firms announcing a self-tender offer can be analyzed in relation to scenarios (A), (B),and (C) above, insight might be gained into the current empirical puzzle. Of course, me

17、asuring whether a favorable or an unfavorable event occurs prior to the stock repurchase may be difficult; however, the events should be reflected in the long-run financial data of the firm. In this study, we divide the sample into three groups based on a time series analysis of the financial data o

18、f each firm corresponding to three years prior to the repurchase announcement date and one quarter prior to the quarter of the announcement. This period is selected since although a firm may be able to window dress its financial data in the short run, its ability to conceal the financial data of sev

19、eral series for three years or more is difficult.To analyze each firm in relation to the three cases above, the following financial series are examined: capital expenditures; net sales; net operating income; and earnings per share. A monotonic increase in all four series is identified as a favorable

20、 event (Case (C). If all monotonically decrease, it is identified as an unfavorable event (Case(B). However, since such ideal scenarios exist in only a few cases, the sample is partitioned into three groups as follows:Group 1.If at least one of the financial series decreases monotonically and in add

21、ition there is no systematic increase in any of the remaining series, then the firm is classified into group 1. Group 1 is characteristic of firms experiencing unfavorable events in the past.Group 2.If the financial series of a firm fluctuates over time, or if one series monotonically decreases and

22、at least one series monotonically increases, then the firm is relegated to group 2. Group 2 consists of firms experiencing mixed events.Group 3.Finally, if one of the financial series increases monotonically and no monotonic decrease in any of the other series occurs, the firm is classified into gro

23、up 3.Group 3 consists of firms where favorable events occurred in the past.Like Howe, He and Kao (1992), we examine the average daily risk-adjusted residuals during the two day (-1, 0) announcement period. The systematic risk of each firm () is estimated from the market model using the daily returns

24、 sixty days prior to the event period. Interestingly, under rational expectations in an efficient market, no positive announcement effect is predicted under the free cash flow (overinvestment) hypothesis. However, the observed positive announcement effect can be explained by an inherent sample selec

25、tion bias. This selection bias arises from the fact that not all firms who should repurchase their stock do so. Specifically, firms characterized by events (B) or (C) above which should contract, but elect not to, would be characterized by a negative announcement effect (since they overinvest ). If

26、all firms exposed to events (B) and (C) were included in the sample, then a zero announcement effect should be observed under rational expectations.While no clear-cut predictions regarding the daily excess returns of each group on the announcement of the repurchase can be made, the relative size of

27、the residuals for each group can be analyzed. If the market expects bad investments and a lower future cash flow for firms in group 1, the repurchase should send a positive signal to the market that unprofitable investments have been eliminated (or reduced). The size of the effect depends on the ext

28、ent to which the firms in this group reduce the overinvestment problem. For group 3, the size of the residuals depends on the extent to which the market knows that these firms possess free cash flow. If the market does not know that a free cash flow problem exists, then the stock repurchase may in f

29、act send a negative signal to the market that there is a free cash flow problem. The announcement effect should be negative. If, however, the market knows a free cash flow problem exists, the share repurchase should send a positive signal and the size of the residuals will depend on the extent to wh

30、ich the market believes these firms are reducing or eliminating their free cash flow problem. Since group 2 may represent firms consistent with all three cases, the announcement effect depends on the relative size of each group. If the dominant explanation for firms in the group is the signaling the

31、ory, however, then the announcement effect should be positive.Since in this article we concentrate on analyzing the possible sources of a repurchasing firms free cash flow, let us analyze the relationship between the occurrence of either a favorable or unfavorable event, or a firms investment opport

32、unities and free cash flow. The following possibilities exist for groups 1 and 3:First, an unfavorable event is observed (e.g., a decline in earnings). Are the firms in this group (group 1) necessarily facing bad investment opportunities? While this is likely, it is not necessarily the case. To answ

33、er this question, the source of the unfavorable news must be identified. If it is due to a realized cash flow below the expected cash flow with no (or a rightward) shift in the firms future IRR curve, then this firm, in order to finance its future investments, will need to raise additional funds eit

34、her by cutting its dividends, issuing more stock or incurring more debt. Another possibility is that the unfavorable event may not be due to a low random cash flow, but rather a leftward shift in the firms present and future IRR curve. In this case, the firm needs less money for capital expenditures

35、, and may even have extra cash flow which it can use to repurchase its stock. Since the sample analyzed includes only firms which repurchase their stock, it is likely that firms in group 1 face bad investment opportunities.Second, a favorable event is observed (e.g., an increase in earnings). Are fi

36、rms experiencing favorable events (group 3) characterized by free cash flow? Not necessarily. To answer this question, again the source of the firms cash flow must be analyzed. If the favorable event is due to a rightward shift in the firms present and future IRR curve (e.g., the profit of the firms

37、 product increases), then it is possible that the firm does not have free cash flow since the increased cash flow is needed to finance future expansion. In this case, a stock repurchase is not expected, and in fact, a new stock or bond issue might be required. Another alternative is that the firm ex

38、periences a high realized return with no shift in its IRR curve (e.g., the price of the firms product increased due to a temporary shortage and then returned to its equilibrium price). In this case, the firm does not need the extra cash flow to fund future investments. Since only firms repurchasing

39、their stock are included in the sample, it is likely that the firms in the sample experiencing a favorable event are accompanied with free cash flow.To analyze and test the effectiveness of our sample stratification into groups 1 and 3, the monthly average excess returns (ARt) and cumulative average

40、 excess returns (CARt) of each group are analyzed for twelve months prior to the repurchase and six months thereafter. Using the market model is estimated for each firm in the twenty-four months prior to the event period. If our sample stratification is correct, the CARs are expected to be negative

41、for group 1 and positive for group 3. To see this, note that favorable and unfavorable events may be associated with the CARs (or the stock price) which are a function of all future cash flows as follows: If there is a reduction in the cash flow prior to the announcement date, it is likely (but not

42、necessarily) followed by negative CARs. For example, a reduction in earnings prior to the announcement is accompanied by positive information regarding future cash flows. In this case, positive CARs might be observed prior to t = 0 in spite of the past unfavorable events. The opposite may also occur

43、; that is, negative CARs might be observed for a firm experiencing favorable past events. However, it is plausible to assume that either no unusual information regarding the future cash flows exist or that the positive and negative information is distributed uniformly across all firms. Therefore, it

44、 is reasonable to assume that favorable events are accompanied with positive CARs and unfavorable events are accompanied with negative CARs. (Indeed, we get that the CARs twelve months prior to the announcement are -17.3% for group 1 and 19.2% for group 3). No clear cut assessment can be made for gr

45、oup 2 (firms experiencing mixed events) or for the combined sample since the CARs will depend on the relative size of each group. Source: DEBORAH L. GUNTHORPE,1993 “Stock Repurchases: A Further Test of the Free Cash Flow Hypothesis”.Review of Quantitative Finance and Accounting.March.pp.353-365.译文：股

46、票回购：对自由现金流量假说的进一步检验自由现金流量（过度投资）的假设由朗和莱兹伯格（1989）和最近的豪、赫和高（1992）研究。利用作为测量过度投资强度的托宾Q理论， 朗和莱兹伯格发现支持自由现金流量理论和现金股利关系的证据。他们的实证结果与假设一致，就公司未来的盈利状况，通过公司过度投资的投资政策，而不是通过发积极的不对称信息改变股利。豪、赫和高（1992）在关于提出收购报价和特别设计股利（SDD）方面研究了自由现金流量假说，扩大了朗和莱兹伯格的研究。不同于朗和莱兹伯格，他们发现对高Q（价值最大化）和低Q（过度投资）公司来说，在有关股票回购和特别股利设计的选择上，公告结果没有区别。由于现金

47、股利，特别设计股利和回购代表现金支出方式的选择，朗和莱兹伯格与豪、赫和高冲突的结果，赫和高提出了一个经验难题。为了阐明这一难题，我们基于公司自由现金流量的来源，通过自招标报价回购公司股票将公司样本分成三个小组。证据与建立的自由现金流量假说是一致的。本文结构如下：第二部分描述了解释决定自由现金流量（过度投资）问题和竞争来源的方法。第三部分描述数据。第四部分将给出观察的结果。结束语在第五部分。为了澄清自由现金流量（过度投资）和信号理论的影响，表示了V公司和K的投资资本。当dV/dK=1时，价值发生在一定的大小范围内。过度投资意味着dV/dK 1。假设一个公司盈利能力方面超过其投资项目，例如，预期的

48、投资回报率（IRR）。dV/dK = 1意味着，在边际p值=R，其中p是该公司的资本成本，R是预期的内部收益率。这种平衡规定公司有多少可用的资源保证再投资，有多少可用分给股东。自由现金流量妨碍了这种平衡。为了简单而不失一般性，假设一个周期模式，该公司在时刻投资和公司在时刻再投资和分配股利。考虑以下三种情况：A.在t时刻（t），就公司未来的盈利能力而言，信息不对称对代理具有积极的意义。这种信息不对称可以是关于现有资本的表现或者在时刻新项目的执行中的任何一个。这些经理向股东发出积极未知的信号，并向这些股东回购一些公司的股票（信号理论）。B在时刻和之间和回购股票之前，公司项目的预期盈利能力减少。也就

49、是说，预期内部收益率曲线向左移动，内部收益率曲线定义为必须使项目的内部收益率高于他们期望的内部收益率。在这种情况下，在时刻公司决定减少他们的资本支出，用现金流量回购他们的股票（自由现金流量理论）。C.在公司的内部收益率曲线之前到回购公告日没有变化，但是在过去执行的投资的实际回报超过了预期的回报（这仅仅像从一个给的分布中随机观察而观测值超过了平均水平）。在这种情况下，公司积累自由现金流量来回购股票。（自由现金流量假说）在情况A中，在股票回购宣告日之前，人们不不期望存在不显著的平均额外风险；而在宣告日时，人们还是期望得到真实回报的。情况B和情况C可能引起自由现金流量，于是发起股票回购，但是他们是截然不同的两件事。在情况B中试一个“不利”事件，然而在情况C中却是一个“有利”事件。因此 ，虽然在情况A中，股票回购的动机是一个关于公司有效项目信息不对称的信号，但是在情况B和情况C中，股票回购的动机却是改变公司投资政策的信号。如果公司宣布自己的投标报价可以分析以上方案（A）、（B）和（C），洞察可能获得到当前经验的难题。当然，衡量先前发