Repurchase and Dividend Policy of Taiwanese Firms

Abstract

Firms in Taiwan are allowed to conduct share repurchase programs after
2000 and must follow strict regulations when conducting repurchases. This
article examines the factors affecting a Taiwanese firm’s decision to conduct
repurchase programs by investigating a set of 3,399 programs from 2000 to
2012 in particular the issue of connection between payout policy, capital
structure and corporate life-cycle stage is investigated. Repurchasing firms
are characterized by higher ratio of retained earnings to total equity and
lower leverage, which supports the hypothesis of life-cycle theory for
repurchases and the hypothesis of altering capital structure. The hypothesis
of disgorging cash holding is only mildly supported. Finally, it is found that
Over the Counter (OTC) repurchasing firms with large size tend to also pay
dividends; however, there exist no such feature among larger size Taiwan
Stock Exchange (TWSE) repurchasers.