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Economic shock and share repurchases

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  • Chen, Hsuan-Chi
  • Harper, Joel T.
  • Iyer, Subramanian R.

Abstract

Using the most recent financial crisis as a natural experiment, we examine firm valuation, capital structure adjustment, and takeover deterrence as motives for share repurchases. We find that both overvalued firms and low levered firms are more likely to announce share repurchase programs and buy back more shares following the repurchase announcements. Potential target firms are more likely to announce larger share repurchase programs, but there is no significantly positive relation between the takeover probability and the completion rate. We also find that the decision to announce share repurchase and the decision to actually buy back shares following the repurchase announcement are separate to some extent.

Suggested Citation

  • Chen, Hsuan-Chi & Harper, Joel T. & Iyer, Subramanian R., 2018. "Economic shock and share repurchases," The North American Journal of Economics and Finance, Elsevier, vol. 44(C), pages 254-264.
    • Handle: RePEc:eee:ecofin:v:44:y:2018:i:c:p:254-264
    DOI: 10.1016/j.najef.2018.01.006
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    2. Burak Pirgaip, 2021. "Pan(dem)ic reactions in Turkish stock market: evidence from share repurchases," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(2), pages 381-402, June.
    3. Wang, Huabing Barbara & Nguyen, Cuong & Rafi, Nurul A., 2021. "The effectiveness of price-stabilizing share buybacks: Evidence from listed firms in Vietnam," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    4. Wang, Ling, 2019. "Measuring the effects of unconventional monetary policy on MBS spreads: A comparative study," The North American Journal of Economics and Finance, Elsevier, vol. 49(C), pages 235-251.
    5. Wang, Ling, 2020. "Unconventional monetary policy and stock repurchases: Firm-level evidence from a comparison between the United States and Japan," Research in International Business and Finance, Elsevier, vol. 51(C).
    6. López-Iturriaga, Félix J. & Santana Martín, Domingo Javier, 2019. "The payout policy of politically connected firms: Tunnelling or reputation?," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).

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