Regulation, Taxes and Share Repurchases in the UK

The authors examine share repurchase activity in the United Kingdom over a period when the tax and regulatory environment changed drastically. They find that the form and intensity of repurchase activity in the United Kingdom is influenced by the tax consequences for pension funds. They also find that firms announcing share repurchases earn smaller excess returns, both in the short run and the long run, than those earned by firms in the United States. This is because of regulatory provisions in the United Kingdom that make it less likely that firms can use superior information to buy back shares when their shares are undervalued.