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The impact of share repurchases on bank operating performance after the global financial crisis: A comparison between the U.S. and Europe

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  • Corbalán, Juan
  • Ferrer, Román

Abstract

This paper conducts a comparative analysis of the impact of actual share repurchases executed by U.S. and European banking firms between 2008 and 2020 on their subsequent operating performance, as measured by ROE and ROA. The empirical results indicate a significantly positive effect of share repurchases on the operating performance of both U.S. and European banks in the year following these transactions. This evidence is consistent with both the information signaling and free cash flow hypotheses, though it exhibits a slightly stronger inclination towards supporting the latter. This suggests that, in a mature industry like banking where organic growth opportunities are limited, stock repurchases serve as an effective strategy for returning excess cash to shareholders, not only enhancing shareholder value but also mitigating the risk of agency conflicts.

Suggested Citation

  • Corbalán, Juan & Ferrer, Román, 2025. "The impact of share repurchases on bank operating performance after the global financial crisis: A comparison between the U.S. and Europe," International Review of Economics & Finance, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:reveco:v:98:y:2025:i:c:s105905602500022x
    DOI: 10.1016/j.iref.2025.103859
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    More about this item

    Keywords

    Share repurchase; Banking firms; Operating performance metrics; ROE; ROA; Information signaling hypothesis; Free cash flow hypothesis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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