IDEAS home Printed from
   My bibliography  Save this paper

The Pump-Priming Effect of Regulatory Reform on Stock Repurchases : Evidence from Lifting the Ban on Treasury Stocks in Japan


  • Teng, Min
  • Hachiya, Toyohiko


This study investigates corporate reactions to the deregulation of stock repurchases set forth on 1 October 2001, in Japan, by looking at the motivations for stock repurchases. We found that stock repurchases increased significantly after the ban on treasury stocks was lifted. Our results show that firms with free-cash flow problems initiated a repurchase plan to distribute excess cash to shareholders and reduce agency costs over the sample period. In addition, firms who wanted to signal undervaluation also undertook stock repurchases over the sample period. These firms were affected by the deregulation, unlike firms that repurchase to reduce agency costs. We determined that firms with weak incentives to signal undervaluation increased stock repurchases significantly in order to respond to the deregulation, since these firms had the ability to take advantage of treasury stock purchases.

Suggested Citation

  • Teng, Min & Hachiya, Toyohiko, 2010. "The Pump-Priming Effect of Regulatory Reform on Stock Repurchases : Evidence from Lifting the Ban on Treasury Stocks in Japan," Working Paper Series 109, Center for Japanese Business Studies (HJBS), Graduate School of Commerce and Management Hitotsubashi University.
  • Handle: RePEc:hit:hjbswp:109

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Yavas, Abdullah, 1994. "Middlemen in Bilateral Search Markets," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 406-429, July.
    2. Yavas, Abdullah, 1992. "Marketmakers versus matchmakers," Journal of Financial Intermediation, Elsevier, vol. 2(1), pages 33-58, March.
    3. Garella, Paolo G, 1989. "Adverse Selection and the Middleman," Economica, London School of Economics and Political Science, vol. 56(223), pages 395-400, August.
    4. Servaes, Henri & Zenner, Marc, 1996. "The Role of Investment Banks in Acquisitions," Review of Financial Studies, Society for Financial Studies, vol. 9(3), pages 787-815.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Treasury stocks; Undervaluation; Takeover deterrence; Capital structure; Cash distribution;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hit:hjbswp:109. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Digital Resources Section, Hitotsubashi University Library). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.