does shareholder prefer share repurchase

CFA Level II
#1

If shareholder has a choice of share repurchase , will he/she prefer it over dividends?

#2

If shareholder can sell his equities by higher market price after corporate action and/or his wealth net of tax is higher than prior repurchase program, it may be flexible. Also depends on tax on capital gains vs dividend tax as you may find in L2 curriculum.

#3

If I were asked on the exam if this post is a violation of standards, I’d say yes (not anymore).

#4

i am supposed depend on clientele effect

#5

i see

#6

Dividends tend to be sticky

#7

Flashback : so i think shareholders do prefer share repurchase on some cases, since it gives them flexibility in deciding when to receive cash flow, and capital gain may be charged at lower tax rate.

#8

Hi Victoryeo1984

I would say, there is no unique rule. Different group of shareholders have

different preferences (ex. institutional vs personal investors). Clientele effect as Jounin says. There are also varies in taxation among countries.

#9

Even more fundamentally, there are two types of shareholders- initial/existing ones which includes promoters and another which are investors who hold the stock in the secondary mkts. Preferences differ

#10

I think it comes down to taxes on cap gains versus taxes on dividends