Short-run performance of recent Australian on-market share buy-back announcements

Share buy-backs (or share repurchases) have become increasingly popular among Australian companies during the recent times. One of the aims of share buy-back is to increase the shareholders' wealth by increasing the market price of company shares. While there are several ways of buying backs shares, on-market buy-backs is the most popular method of share repurchase in Australia. Australian listed companies have announced more than two hundred on-market share buy-backs over the past three years. The aim of this paper is to examine the short-run market performance of these recent on-market buy-back announcements.

Short-term effect of on-market buy-back announcements on the share price is an issue, which is theoretically interesting and practically important. Buy-back announcements are believed to convey a signal to the market (i.e., signalling effect). If the market considers this signal positively, the short-run price of the shares would increase. If the signal were considered negatively, the short-run price of shares would decrease. If there is no signalling content or the signal is neutral the price would remain the same. In this study, signalling effect of share buy-back announcements is empirically examined using most recent Australian data. The total population of on-market buy-back announcements that have been lodged with Australian Stock Exchange by Australian listed companies during the period from 1 January 2000 to 10 March 2003 are included in this study. The abnormal market return over the short-run (announcement day and 10 trading days centred on the announcement date) is examined using the All Ordinaries Accumulation Index as the reference portfolio. The daily abnormal returns (AR) and cumulative abnormal returns (CAR) during the event period are computed. The results indicate that the Australian market generally positively reacts to on-market buy-back announcements.

Takeover deterrent effect of on-market share buyback

This study examines whether Australian firms use on-market share buybacks to deter unwanted takeover risk from the stock market. We found a statistically significant and positive relation between a firm’s ex-ante takeover probability and its on-market share buyback activities. The result is robust to alternative modelling techniques, namely TOBIT and Censored Quantile Regressions. This could be partly explained by Brown and O’day (2007) hypothesis on dividend payout, that in a non-classical taxation system like Australia, yield of share buyback is positively related to dividend payments. However on-market share buyback activity is closely related to temporary cash flows rather than permanent operating cash flows. This might indicate that besides dividend payments, Australian firms might take advantage of the financial flexibility of share buybacks to redistribute non-permanent cash flows to their shareholders.

Takeover deterrent effect of on-market share buyback in Australia

This study examines whether Australian firms use on-market share buybacks to deter unwanted takeover risk. We found a statistically significant and positive relationship between a firm’s ex-ante takeover probability and its on-market share buyback activities. Our result is robust to alternative modelling techniques, namely TOBIT and Censored Quantile Regressions. This paper found evidence that in a dividend imputation credit taxation system the yield of share buyback is positively related to dividend payments. However, on-market share buyback activity is closely related to temporary cash flows rather than to permanent operating cash flows. This might indicate that, besides dividend payments, Australian firms take advantage of the financial flexibility that comes with share buybacks to redistribute nonpermanent cash flows to their shareholders.

Reaching and influencing consumers in the prescription medicine market

Purpose – Celebrex became the first of a new class of drugs known as COX-2 selective non-steroidal anti-inflammatory drugs. It improves treatment for arthritis sufferers without compromising the protective lining of the stomach. The purpose of this paper is to illustrate how direct-to-consumer advertising (DTCA) of prescription medicines can be used to rebuild faith in the cyclooxygenase-2 (COX-2) product category.

Design/methodology/approach – The case is developed using published sources and no input is required from company representatives. The presentation style follows the classic comprehensive case format used in postgraduate teaching programmes.

Findings – Business executives and strategic marketing students would benefit from a discussion on how external environmental factors can suddenly impose a review of marketing strategy. The reader learns how management addresses the business dilemma using DTCA.

Research limitations/implications – A blockbuster rival drug Vioxx is withdrawn due to cardiovascular (CV) health safety concerns. A resulting dominant market situation soon becomes a business dilemma. The Federal Drug Administration calls for a “black box” warning label on Celebrex, the most serious type of warning.

Practical implications – The implications are that having a product in a class of its own is not enough. It highlights the need to communicate to different audiences, to both the medical profession and the end-user. Getting doctors to recommend the medicine and pulling the product through the channel by stimulating patient demand after a health scare are paramount.

Originality/value – This is the first pharmaceutical business case where the withdrawal of a rival product leaves the dominant competitor in a monopoly situation. Contrary to expectation, market share plummets despite the absence of competition.

Information signalling of common stock repurchase announcements: Australian evidence

Stock repurchases (or share buy-backs) have become increasingly popular among Australian companies. One of the main aims of announcing a stock repurchase by a listed company is signalling the market that its shares are currently underpriced. When market reacts to the signal, price of the shares is expected to increase immediately after the announcement. While there are several ways of repurchasing shares, 'on-market buy-backs' is the most popular method of stock repurchases in Australia. Australian listed companies have announced more than two hundred on-market share buy-backs over the past three years. The aim of this paper is to examine the information signalling effects of these on-market buy-back announcements. If the signal is considered positively (negatively) by the market, the price of the repurchasing company's shares should increase (decrease) immediately after the announcement. If there is no information content in the announcement, the price will remain the same. In this study, signalling effect of share buy-back announcements was examined using most recent Australian data. The total population of on-market buy-back announcements during the period from January 1, 2000 to March 10, 2003 was included. The abnormal market return over the short-run (announcement day and 9 trading days centred on the announcement date) was computed using the All Ordinaries Accumulation Index as the reference portfolio. The daily Abnormal Returns (AR) and Cumulative Abnormal Returns (CAR) during the event period were computed. The results strongly support the information-signalling hypothesis of share buy..backs. Australian market generally considers announcement of on~market share repurchases as signalling of insider information that shares are currently underpriced.

Online banking vs. bricks & mortar - or a hybrid model? A preliminary investigation of Australian and Indian banks

Deregulation, innovations in mobile and wireless technologies and media convergence, together with the rapid diffusion of the Internet, have opened up strategic business opportunities in the financial sector. With deregulation removing entry barriers, an increasing number of online banks are threatening the market share of ‘bricks and mortar’ banks. To survive this competition, and to leverage the new opportunities of online and mobile banking facilitated by the Internet, many banks have adapted a hybrid, ‘clicks and mortar’ model, to increase their profitability while reducing transaction costs. In this paper, we report the results of a preliminary analysis based on a few major banks in Australia and India, two diverse economies, to reveal some interesting insights.

Aligning marketing strategy and marketing implementation for marketing performance

The purpose of this paper is to examine the differences between “pure” and “mixed” marketing strategies in terms of implementation practices and performance. The strategies compared use the Miles and Snow (1978) typology to develop Pure Prospectors, Pure Defenders, Reactors and Mixed strategies the latter strategy type being similar to Analysers.

Previous strategy type implementation research has used debatable strategy classification methodologies and has not isolated “pure” marketing strategies. The purpose of this paper is to clearly identify and separate “pure” marketing strategies from “mixed” strategies.

In terms of strategy implementation a key finding was that the Miles and Snow implementation recommendations made in the 1970’s no longer appear to be appropriate in the 2000’s This appears to be the case because no need to align human resource practices and organisational structure with strategy was apparent in our findings.

In terms of strategy performance differences a key finding was that Pure Prospectors outperformed Reactor strategies in terms of new markets, sales growth, new products and market share. However, the financial costs of investing in new markets and new products undertaken by the aggressive Pure Prospector strategies results in only similar ROI performance to other strategies. This is consistent with the concept of performance equifinality.

Marketing planning and business performance : an empirical study of large Australian organisations

The marketing planning process is said to influence organisational performance. This influence is realised through the adoption of a focused approach aimed at achieving specific marketing objectives, which motivates the adaptation of the internal capabilities of an organisation in facilitating an effective implementation. This study investigated the association of formal marketing planning with business performance. The results showed that marketing planning has a stronger, positive relationship with market share, than with the overall financial performance of the organisation. The study also compared the associations of marketing planning and market orientation variables with the performance measures. The results indicated that the two variables associate at about the same magnitude with market share and the overall financial performance.

Marketing information sources and the performance of Australian businesses

This study investigated the various sources of information used by business organisations and their association with business performance indicators. The results showed that larger Australian companies predominantly used various internal and external secondary data sources of information, followed by formal primary marketing research. The study indicated an association between market share and the use of competitors, advertising agencies, and sales promotion agencies as sources of information, while overall financial performance was associated with the use of competitors and media/trade publications.

Testing the circumplex model of emotions in a consumer setting

There is widespread belief that more positive emotional reactions to consumption situations will lead to positive business outcomes such as increased market share through the combination of increased loyalty, repeat purchase and strengthened reputation. However, most of the psychological work on emotions has not dealt directly with consumption experiences, but rather broader everyday experiences. In this study, psychological models of emotion were tested using magazine subscribers, specifically looking at their emotional responses to the magazine and the overall subscription package. The aim was to determine whether one of the major theories on emotional structure, the circumplex model, is relevant and consistent when applied specifically to a consumption experience. The results are positive, with the model being supported, and they provide insight into the structure and relations of different emotional responses (e.g., satisfaction, delight) consumers might have to a consumption experience.

The marketing audit and organizational performance an empirical profiling

This study investigates the use of strategy to address changes in business performance. It suggests the use of the marketing audit as a facility that can assist with the establishment, maintenance, and management of a market orientation strategy. The practice of the marketing audit and its perceived benefits are examined, and their relationships with change in business performance are investigated. The results indicate a positive association between the usage of the marketing audit and increase in market share, and a stronger increase in market share than increase in overall financial performance.

Generic medicines in Australia : business dynamics and recent policy reform

This article describes the role of generics in the Australian prescription drug market and patterns of business activity in this dynamic market segment. The Pharmaceutical Benefits Scheme (PBS) is the central mechanism for the supply of prescription medicines. PBS prices are arrived at through cost-effectiveness analyses comparing new products against already available products and therapies. In this system, prices do not operate effectively as incentives for consumers or prescribers to choose generics, and their market share was historically marginal. In recent years, generics suppliers achieved a growing market share through discounts (trading terms) to pharmacists. It is estimated that around 30% of PBS scripts, representing around 15% of PBS sales by value, are now filled with generics. Complex changes to the PBS were introduced in 2007, to be phased in over the period to 2012, aimed at increasing the scope for cost benefits to the government, and to lesser extent consumers, from the expanding availability of generic medicines.

High prices for generics in Australia : more competition might help

It is commonly believed that dispensed prices of medicines in Australia are substantially lower than those in other developed countries, particularly the US. This article reports the results of an analysis comparing dispensed prices for the most commonly prescribed and the highest cost items in Australia with dispensed prices in the US. Although a large majority of items are less expensive in Australia than in the US, Australian prices are higher for a substantial number of products, particularly generic drugs. This article examines various policies affecting the pricing of generics in Australia. It is postulated that the main cause for higher prices for a substantial number of generic products is the lack of price competition. This results from government policy which ensures that a price reduction by one company is communicated immediately to all competitors in that market along with an invitation to match the reduced price. The dominant strategy for all suppliers is to only reduce their price in response to a reduction in price by a competitor. The result is a lack of differentiation in pricing across brands of a medicine on the Schedule of Pharmaceutical Benefits. The government could improve the structure of the generics market and encourage greater competition by ceasing to disclose competitor firms’ offers to other competitors. The government could conduct pricing reviews of each generic product relatively infrequently (eg, only once annually or every 18 months). At the time of the pricing review, the government would request confidential offers on price for a generic from all players in the market. Brands should then all be listed under the Pharmaceutical Benefits Scheme (PBS) at the offered price. Prices offered by the individual supplier would apply until the next pricing review. The PBS would continue to subsidise up to the price of the lowest priced brand, with brand premiums applying to all brands priced higher than the benchmark price. Such an approach would provide opportunity for players in the market to capture market share by being thelowest priced brand.

Is the social agenda driving sustainable property development in Melbourne, Australia?

Purpose – Sustainable property development has increased in market share over the past two to three years globally and locally. This research aims to analyze the drivers and barriers to sustainable property development in Melbourne using the triple bottom line (TBL) theoretical framework. The TBL posits that sustainability has social, economic and environmental aspects to fulfil.

Design/methodology/approach – A questionnaire was sent out to 190 developers in Melbourne who promoted sustainable property development to ascertain their views about the drivers and barriers.

Findings – This research indicates that in the 2007 Melbourne market the drivers were social rather than economic. The data reveal that social reasons are considered more than economic arguments for incorporating sustainability into developments. The business case, or the economic drivers for sustainability alone do not convince developers.

Research limitations/implications – The questionnaire survey informed us about developers' views but not why they have these views. The sample was limited to Melbourne.

Practical implications – More developments are required for developers to become convinced of the benefits. The relatively low price of energy undermines the business case for sustainability in property here and needs to be fully costed.

Originality/value – This paper illustrates that whilst the theoretical framework cites three key areas for sustainability, the reality is that developers are currently driven by social and environmental factors primarily and the business case is not accepted by the majority of developers.