The authors investigate whether the effects of stock buyback announcements on credit default swap (CDS) spread changes for US firms depend on macroeconomic conditions. The authors find that abnormal CDS spreads increase for small-sized firms announced to repurchase a higher share ratio during...

There are numerous studies that demonstrate the tendency for rival firms to repurchase their stocks in response to the competitive threat of intra-industry initial public equity offerings (IPOs) and/or seasoned equity offerings (SEOs). However, these research works are characterized by empirical...

Public attention to a firm may provide valuable monitoring, but it may also have a dark side by constraining management’s decisions and distracting it. We use inclusion in the S&P 500 index as a positive shock to public attention. Media coverage, Google searches, SEC downloads, SEC comment...

There is a puzzle that few undervalued firms make repurchase announcements in China despite the value-adding motive of share repurchases. Inspired by the puzzle, this paper explores the market timing effect of the repurchase signaling. We find a positive relationship between the...

We study whether CEO narcissism affects a firm’s share repurchase announcements and their implementations. Using signature characteristics as a measure of narcissism, we find that US firms with narcissist CEOs are more likely to make repurchase announcements and announce higher repurchase...

The purpose of this study was to examine the determinants of cash distribution options by critically considering the effects of earnings, dividends, firm size, and economic value added. The distribution of cash dividends to shareholders serves as a basic means by which shareholders receive...

Share buybacks have become a popular way for companies to return capital to shareholders. However, there is an ongoing debate regarding the impact of share buybacks on the performance and shareholder value. This paper starts by examining the literature on share buybacks and aims at testing the...

Research AbstractThis study analyzes the association between income shifting incentives and share repurchases using a hand-collected sample of U.S. multinational corporations (MNCs) from 2006 to 2020. We find a significant negative association between income shifting and share repurchases....

Securities regulation must balance the dual objectives of mitigating market abuse and permitting issuers to manage their capital flexibly and efficiently. This paper examines this issue in the specific context of the regulation of share buybacks within the insider dealing framework in a...

In this article, we examine dividends and share repurchases of S&P 1500 firms during the COVID-19 crisis characterized by the stock market crash and a relatively quick stock price recovery propelled by technology stocks. We find that the great majority of firms either maintain or increase the...

Accelerated share repurchases (ASRs) are a type of stock buyback wherein the repurchasing firm contracts a financial intermediary to acquire the shares on its behalf. The intermediary purchases the shares from the open market and is compensated by the firm according to the average of the stock...

Textbook theory assumes that firm managers maximize the net present value of future cash flows. But when you ask them, the people running large public corporations say that they are maximizing something else entirely: earnings per share (EPS). Perhaps this is a mistake. No matter. We take...

In this era of rapid digital revolution within the financial sector, our paper offers a cutting-edge approach to the intricacies of share buyback programs by employing Genetic Algorithms (GAs). Navigating the complexity of financial market operations, we leverage artificial intelligence to craft...

Prior research documents a positive relation between controlling shareholders’ share pledge and the probability of stock repurchase announcement. This study investigates whether and how stock mispricing and corporate governance affect this relation. By extending the framework of Chan, Chen,...

We examine the association between family firms, free cash flow and the long-term performance following share repurchase announcements. We find that family firms have better performance than non-family firms. We also find that free cash flow is positively associated with performance, and the...

Researchers in developed countries have questioned whether share repurchase activity influences internal investment. The aim of this study was to investigate the relationship between share repurchases and internal investment (defined as capital expenditure, employment expenditure, and research...

We present evidence that share repurchases reduce investment inefficiencies related to short-term investors. Using U.S. data from 1988 to 2018, we first document that stock buybacks are associated with lower long-term investments. However, contrary to popular perception that buybacks sacrifice...

Our study examines whether share repurchases lead to reductions in real investments. Repurchase opponents argue that managers forego value-enhancing investments to conduct opportunistic repurchases, while proponents argue that repurchases return excess cash to shareholders who then reinvest it...

Kahle and Stulz (2021) find that inflation-adjusted corporate payouts (dividends and repurchases) in the US are three times larger over the period 2000–2019 (post-2000) compared to the 1971–1999 period (pre-2000), and that the growth in the payouts comes from repurchases instead of...

The paper investigates the role of board dynamics in explaining the effect of payout policy on shareholders' wealth creation at the market and bank levels. The study employs the 2SLS estimation of a panel dataset of 528 banks from 29 African countries from the year 2006 to 2018. The study finds...

The paper aims to determine whether French companies respond to investor demand and preference in terms of share repurchases and dividend payments. The study is based on data from the Thomson Reuters Eikon database and focuses on French companies listed on the CAC All-Tradable index from 2000 to...

This study examines whether the CEO uses share repurchases to sell her equity grants at inflated stock prices, a concern regularly voiced in politics and media. We find that the timing of buyback programs and equity compensation, i.e., the granting, vesting, and selling of equity, is largely...

As corporate payouts to shareholders reach record high levels and garner the attention of policymakers, understanding their causes and consequences is more important than ever. This chapter surveys the academic literature on repurchases, with a particular emphasis on research undertaken in the...

Firms have trouble issuing new bonds during financial market meltdowns. However, an intriguing yet often overlooked fact is that many firms also engage in debt buybacks at the same time. In this paper, we build a dynamic model to study the incentives for equity holders to buy back the debt. The...

Why do listed firms herd to repurchase shares? Analyzing complete repurchase records from the Chinese stock market from 2005 to 2021, we discover that firms aiming to boost stock prices through repurchasing shares drive the tendency for peers to also make repurchasing announcements. The positive...

This study examines whether the CEO uses share repurchases to sell her equity grants at inflated stock prices, a concern regularly voiced in politics and media. We find that the timing of buyback programs and equity compensation, i.e., the granting, vesting, and selling of equity, is largely...

Fortune magazine published an article in February 2020 titled, "Boeing’s Long Descent", regarding Boeing’s focus on paying high dividends to its shareholders at the expense of R&D. If Boeing had not been paying high dividends to its shareholders, it could have invested on R&D which would...

Abstract. U.S. corporate tax cuts have become less expansionary since the mid-1980s. Using general equilibrium models with corporate financial allocations, we show that rising share buybacks render corporate tax cuts less expansionary. Although buybacks increase shareholders’ and...

We find that focal firms’ CEOs respond to increasing repurchases by their publicly disclosed compensation peer (CP) firms by repurchasing more of their own shares. The CP herding effect is stronger for small focal firms or those with substantial stock or option-based compensation than for...

A misunderstanding of textbook-level finance principles underlies the political attack on share buybacks. Critics advocate increasing the tax on buybacks in the hope of inducing firms to invest more and in ways that benefit workers. This strategy will backfire at growth-stage firms, which will...

Stock repurchases are controversial. Researchers often view the positive association between free cash flow and the volume of the stock repurchases to be in the shareholders’ interest and the positive association between executive options and stock repurchases to be in the managers’...

We study repurchase options (repo contracts) in a competitive asset market with asymmetric information. Gains from trade emerge from a liquidity need, but private information about asset quality prevents the full realization of trade. We obtain a unique equilibrium, which features a pooling repo...

This paper documents the spillover effect of firms' financial restatements on their peer firms' stock repurchases. In a difference-in-differences setting, I find a causal relationship where one firm's financial restatement increases its peer firms’ propensity to repurchase shares by 12.9...

I analyze attention-induced stock repurchases. I hypothesize that firms that announce an open market repurchase program of a certain size are likely to follow through to a larger extent if they receive greater investor attention to their repurchase behavior. I test this hypothesis using 10-K and...

This paper examines whether share repurchase announcements are signals of undervaluation or insiders’ opportunistic activities by investigating insider trading patterns surrounding buyback announcements in Vietnam. Consistent with the insider opportunism hypothesis, we show that insiders are...

Bond repurchases are widespread in the US and other markets but data limitations have thus far prevented market-timing analysis. We fill this gap using unique daily data from Israel and show that firms time the market in their actual open market bond repurchases. Firms repurchase their bonds...

This paper tests trade-off and pecking order predictions about stock repurchases and dividends by using a sample of publicly traded U.S. firms from 1983-2018. We find that stock repurchases have the characteristics of dynamic adjustment compared to cash dividends. Examination of the determinants...

Using a large sample of U.S. stocks covering more than three decades, we empirically test common criticisms of and rationales for stock repurchases. Repurchases account for a tiny fraction of the trading volume in a typical stock, making their price impact too small to facilitate short term...