Share purchases in Norway

Abstract

This thesis provides updated statistics on all share repurchase announcements and all open market share repurchase executions for firms on the main list of the Oslo Stock Exchange (OSE) in the period from 1998 to 2013. Further, it explores which motives firms have for announcing and executing share repurchases. The transparent environment for share repurchases in Norway is reflected in our detailed dataset1. We find that an increasing amount of firms on the main list of the OSE announce share repurchases over the period, without it necessarily resulting in more firms executing open market share repurchases. Further, we do not believe this is caused by our dataset only containing open market share repurchase executions, since the other types of share repurchase executions are very rarely employed in Norway2. Using logit regressions, we test whether (i) the optimal capital structure hypothesis, (ii) the excess cash hypothesis, (iii) the payout preference hypotheses3, or (iv) the undervaluation signalling hypothesis explain why firms announce and execute share repurchases. We find evidence that an optimal capital structure motivate both share repurchase announcements and executions, although this could be related to profitable firms with low leverage actively repurchasing shares. In addition, the significance of the result is very sensitive to sample size for announcements, suggesting that there might not be any strong motives for announcing a share repurchase. Further, our results find no relation between dividends and share repurchases for either share repurchase announcements or executions, indicating support for the dividend complement hypothesis.