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Effects of Legalizing Open Market Share Repurchases: International Evidence

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  • Wang, Zigan
  • Yu, Luping

Abstract

By constructing a unique dataset of deregulation laws from 38 countries and utilizing yearly variation in law passage for these markets, we causally identify the effects of legalizing open market share repurchases. After legalization, treasury shares and stock repurchases increase, while dividend, cash holding, capital expenditure, and acquisitions decrease, leading to an increase in post-legalization stock returns and firm value. The effects are weaker in countries with trading restrictions, in countries with lower net tax rates on dividends, for firms with higher target payout ratios, and for financially constrained firms. No macro variables are found to predict the timing of legalization.

Suggested Citation

  • Wang, Zigan & Yu, Luping, 2021. "Effects of Legalizing Open Market Share Repurchases: International Evidence," Journal of Law, Finance, and Accounting, now publishers, vol. 6(1), pages 125-177, May.
    • Handle: RePEc:now:jnllfa:108.00000046
    DOI: 10.1561/108.00000046
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    Cited by:

    1. Zunian Luo, 2022. "Powering Up a Slow Charging Market: How Do Government Subsidies Affect Charging Station Supply?," Papers 2210.14908, arXiv.org, revised Jan 2023.

    More about this item

    Keywords

    Share repurchases; firm value; firm investment; cash holding; payout policy;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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