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Investment opportunities and share repurchases

  • Boudry, Walter I.
  • Kallberg, Jarl G.
  • Liu, Crocker H.
Registered author(s):

    We examine the over-investment motivation for share repurchases using a sample of 139 Real Estate Investment Trusts (REITs) between 1996 and 2010. By combining a REIT's property portfolio data with project ROAs from the underlying real estate market, we are able to create a unique measure of the firm's investment opportunity set. Controlling for other possible buyback rationales, we find that poor investment opportunities are related to higher levels of share repurchases. Conditioning on investment opportunities, we find that the level of cash is positively related to repurchases only for low investment opportunity set firms. We also find a negative relationship between share repurchase announcement returns and investment opportunities.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0929119913000631
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    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 23 (2013)
    Issue (Month): C ()
    Pages: 23-38

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    Handle: RePEc:eee:corfin:v:23:y:2013:i:c:p:23-38
    DOI: 10.1016/j.jcorpfin.2013.07.006
    Contact details of provider: Web page: http://www.elsevier.com/locate/jcorpfin

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