Abstract
We use a new international setting to test and strengthen identification of the “target leverage” hypothesis in the payout policy literature. We conduct a quasi-natural experiment induced by staggered share repurchase legalization in 17 economies and analyze its influences on leverage dynamics. After controlling for other repurchasing motives, firms under-leveraged before legalization are more likely to buy back shares immediately after legalization. Post-legalization repurchases also facilitate firms’ movement toward target leverage, especially when firms are under-leveraged. This facilitating effect is stronger under lower repurchasing restriction, higher dividend tax penalty, and lower financial constraint.
Original language | English |
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Article number | 101498 |
Number of pages | 30 |
Journal | Journal of Empirical Finance |
Volume | 77 |
Early online date | 28 Mar 2024 |
DOIs | |
Publication status | Published - Jun 2024 |
Scopus Subject Areas
- Finance
- Economics and Econometrics
User-Defined Keywords
- Capital structure
- Share repurchases
- Target leverage