Empirical studies on share issuance and repurchase decisions

Financial constraints influence corporate policies of firms, including both investment decisions and external financing policies. The relevance of this phenomenon has become more pronounced during and after the recent financial crisis in 2007/2008. In addition to raising costs of external financing, the effects of financial crisis limited the availability of external financing which had implications for employment, investment, sale of assets, and tech spending. This thesis provides a comprehensive analysis of the effects of financial constraints on share issuance and repurchases decisions. Financial constraints comprise both internal constraints reflecting the demand for external financing and external financial constraints that relate to the supply of external financing. The study also examines both operating performance and stock market reactions associated with equity issuance methods. The first empirical chapter explores the simultaneous effects of financial constraints and market timing on share issuance decisions. Internal financing constraints limit firms’ ability to issue overvalued equity. On the other hand, financial crisis and low market liquidity (external financial constraints) restrict availability of equity financing and consequently increase the costs of external financing. Therefore, the study explores the extent to which internal and external financing constraints limit market timing of equity issues. This study finds that financial constraints play a significant role in whether firms time their equity issues when the shares are overvalued. The conclusion is that financially constrained firms issue overvalued equity when the external equity market or the general economic conditions are favourable. During recessionary periods, costs of external finance increase such that financially constrained firms are less likely to issue overvalued equity. Only unconstrained firms are more likely to issue overvalued equity even during crisis. Similarly, small firms that need cash flows to finance growth projects are less likely to access external equity financing during period of significant economic recessions. Moreover, constrained firms have low average stock returns compared to unconstrained firms, especially when they issue overvalued equity. The second chapter examines the operating performance and stock returns associated with equity issuance methods. Firms in the UK can issue equity through rights issues, open offers, and private placement. This study argues that alternative equity issuance methods are associated with a different level of operating performance and long-term stock returns. Firms using private placement are associated with poor operating performance. However, rights issues are found empirically to be associated with higher operating performance and less negative long-term stock returns after issuance in comparison to counterpart firms that issue private placements and open offers. Thus, rights issuing firms perform better than open offers and private placement because the favourable operating performance at the time of issuance generates subsequent positive long-run stock price response. Right issuing firms are of better quality and outperform firms that adopt open offers and private placement. In the third empirical chapter, the study explores the levered share repurchase of internally financially unconstrained firms. Unconstrained firms are expected to repurchase their shares using internal funds rather than through external borrowings. However, evidence shows that levered share repurchases are common among unconstrained firms. These firms display this repurchase behaviour when they have bond ratings or investment grade ratings that allow them to obtain cheap external debt financing. It is found that internally financially unconstrained firms borrow to finance their share repurchase when they invest more. Levered repurchase firms are associated with less positive abnormal returns than unlevered repurchase firms. For the levered repurchase sample, high investing firms are associated with more positive long-run abnormal stock returns than low investing firms. It appears the market underreact to the levered repurchase in the short-run regardless of the level of investments. These findings indicate that market reactions reflect both undervaluation and signaling hypotheses of positive information associated with share repurchase. As the firms undertake capital investments, they generate future cash flows, limit the effects of leverage on financial distress and ultimately reduce the risk of the equity capital.

Polymer microspheres: synthesis, characterisation and post-functionalisation by olefin metathesis

Porous polymer particles are used in an extraordinarily wide range of advanced and everyday applications, from combinatorial chemistry, solid-phase organic synthesis and polymer-supported reagents, to environmental analyses and the purification of drinking water. The installation and exploitation of functional chemical handles on the particles is often a prerequisite for their successful exploitation, irrespective of the application and the porous nature of the particles. New methodology for the chemical modification of macroreticular polymers is the primary focus of the work presented in this thesis. Porous polymer microspheres decorated with a diverse range of functional groups were synthesised by the post-polymerisation chemical modification of beaded polymers via olefin cross metathesis. The polymer microspheres were prepared by the precipitation polymerisation of divinylbenzene in porogenic (pore-forming) solvents; the olefin cross-metathesis (CM) functionalisation reactions exploited the pendent (polymer-bound) vinyl groups that were not consumed by polymerisation. Olefin CM reactions involving the pendent vinyl groups were performed in dichloromethane using second-generation Grubbs catalyst (Grubbs II), and a wide range of coupling partners used. The results obtained indicate that high quality, porous polymer microspheres synthesised by precipitation polymerisation in near-θ solvents can be functionalised by olefin CM under very mild conditions to install a diverse range of chemical functionalities into a common polydivinylbenzene precursor. Gel-type polymer microspheres were prepared by the precipitation copolymerisation reaction of divinylbenzene and allyl methacrylate in neat acetonitrile. The unreacted pendent vinyl groups that were not consumed by polymerisation were subjected to internal and external olefin metathesis-based hypercrosslinking reactions. Internal hypercrosslinking was carried out by using ring-closing metathesis (RCM) reactions in toluene using Grubbs II catalyst. Under these conditions, hypercrosslinked (HXL) polymers with specific surface areas around 500 m2g-1 were synthesised. External hypercrosslinking was attempted by using CM/RCM in the presence of a multivinyl coupling partner in toluene using second-generation Hoveyda-Grubbs catalyst. The results obtained indicate that no HXL polymers were obtained. However, during the development of this methodology, a new type of polymerisation was discovered with tetraallylorthosilicate as monomer.