Discussant: Yanzhi Wang Yuzn Ze University

1. Determinants of Share Repurchases: International Evidence Bong Soo Lee and Jungwon Suh2008 NTU International Conference Discussant: Yanzhi Wang Yuzn Ze University

2. Summary • This study examines the patterns and determinants of share repurchase using firm-level data from seven major countries: Australia, Canada, France, Germany, Japan, the U.K., and the U.S. over the period 2000-2005. • They find that non-U.S. firms do not repurchase shares as much as U.S. firms do. • Firms generally do not use repurchases as a substitute for dividends. • Finally, repurchasing firms have different firm characteristics- firm size, profitability, and so on. • Across countries, the fact that large cash holdings are a key motive for share repurchases is a crucial finding in this paper.

3. Comments • To me, this paper is very promising and develops the study on repurchase across countries. • Very few papers examine the repurchases in an international angle. The authors also link to repurchase to dividend and look at the overall payout, and this approach relates to modern development in payout literature. • My general comment is: I like this paper.

4. Comments • My major concern is the inconsistency between the title and the analyses of this paper. • The paper seems aimed to study the international repurchase, but the paper turns out to be a payout paper that looks at repurchase and dividend at the same time. • I could understand that authors might want to link to recent repurchase and dividend development (e.g., von Eije and Meggionson, 2008; Skinner, 2008), but the readers would be confused if they do not understand the recent repurchase development.

5. Comments • The measure of the repurchase ratio in this paper is defined as the dollar amount bought divided by total assets. (I guess the authors using the book value of assets as the scale variable in the paper but not the market value.)

6. Comments • This approach raises two important concerns to me. First, the repurchase ratio could be expressed as follow: • Pmkt/Ppar is very similar to market-to-book ratio (M/B) that is the inverse of book-to-market ratio (B/M).

7. Comments • Second, do the authors standardize repurchase-to-asset ratio by inflation (or CPI)? • If the inflations differ over countries, then it will be a concern. For example, given that all countries have the same price level in year 2000, the numerator (the dollar amount bought back) may increase over years if U.S. has higher inflation rate while the denominator (book value of assets) tends to be fixed (book value of assets is less related to inflation). • My suggestion: consider standardizing the repurchase ratio by market value of equity as the conventional way does. This could avoid the two concerns above.

8. Comments • The authors argue that cash ratio is an important determinant of share repurchase. • I am questioning how the authors explain the cash ratio in repurchases? • Does it relate to free cash flow? • In Chan, Ikenberry and Lee (2004), they use free cash flow measured by Lehn and Poulsen (1989) and test the free cash flow hypothesis. • In fact, Chan et al (2004) also study actual buyback (defined as the method by Stephens and Weisbach, 1998), actual buyback ratio is related to B/M ratio but not free cash flow. • Even the authors would like to explain in another way, the authors also need to control the free cash flow concern.