Real effects of share repurchases legalization on corporate behaviors

• 成果类型: Article
• 署名作者: Wang, Zigan; Yin, Qie Ellie; Yu, Luping
• 署名单位: University of Hong Kong; Hong Kong Baptist University; Xiamen University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.10.008
• 发表日期: 2021
• 页码: 197-219
• 关键词: SHARE REPURCHASES; PAYOUT; INVESTMENT; INNOVATION; firm performance

摘要

We use staggered share repurchases legalization from 1985 to 2010 across the world to examine its impact on corporate behaviors. We find that share-repurchasing firms do not cut dividends as a substitution. The cash for repurchasing shares comes more from internal cash than external debt issuance, leading to reductions in capital expenditures and R&D expenses. While this strategy boosts stock prices, it results in lower long-run Tobin's Q, profitability, growth, and innovation, accompanied by lower insider ownership. Tax benefits and paying out temporary earnings are two primary reasons that firms repurchase. (C) 2020 Elsevier B.V. All rights reserved.