Abstract
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.
Original language | English |
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Pages (from-to) | 197-219 |
Number of pages | 23 |
Journal | Journal of Financial Economics |
Volume | 140 |
Issue number | 1 |
Early online date | 28 Oct 2020 |
DOIs | |
Publication status | Published - Apr 2021 |
Scopus Subject Areas
- Accounting
- Finance
- Economics and Econometrics
- Strategy and Management
User-Defined Keywords
- Firm performance
- Innovation
- Investment
- Payout
- Share repurchases