文档介绍：本科毕业论文(设计)
外文翻译
原文:
Stock Repurchases: A Further Test of the Free Cash Flow Hypothesis
1. Introduction
Empirical tests of firms repurchasing their stock generally conclude that the observed positive stock price reaction around the announcement of repurchase self-tender offers is consistent with the signalling theory (see Masulis (1980), Vermaelen (1981, 1984), Dann (1981), Sinha (1991), Comment and Jarrell (1991), and Howe, He and Kao (1992)). This theory argues that cash outflows (cash dividends, specially designated dividends, or repurchases) are used by management to disseminate positive asymmetric information to shareholders about the future profit potential of the firm. Specifically, Vermaelen concludes that with stock repurchases, firms offer a premium for their own shares in order to signal that the firm is undervalued. This signal is credible since the premium imposes a cost on nontendering shareholders which includes management (who is generally precluded from participating in the offer). If the tender offer premium is greater than the extent to which the firm is undervalued, then this "false" signal will result in a reduction in the wealth of nontendering shareholders (management).
An alternative theory, and the one investigated in this article, is Jensen's (1986, 1989) free cash flow (overinvestment) hypothesis. Jensen points out that a firm accumulating free cash flow can either increase its cash dividends, repurchase some of its stock, or overinvest. He argues that firms with substantial free cash flow tend to overinvest and undertake projects with present values. Furthermore, when a firm with free cash flow increases its cash dividends, its value is expected to increase since fewer present value projects are now taken. Of course, Jensen's argument assumes that managers are not maximizing
firm value. If pensation scheme can be devised which ensures that value will be maximized, then free cash flow will not exist.
The free cash flow (overinves