Real effects of share repurchases legalization on corporate behaviors

Zigan Wang*, Qie Ellie Yin, Luping Yu

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    31 Citations (Scopus)


    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 languageEnglish
    Pages (from-to)197-219
    Number of pages23
    JournalJournal of Financial Economics
    Issue number1
    Early online date28 Oct 2020
    Publication statusPublished - Apr 2021

    Scopus Subject Areas

    • Accounting
    • Finance
    • Economics and Econometrics
    • Strategy and Management

    User-Defined Keywords

    • Firm performance
    • Innovation
    • Investment
    • Payout
    • Share repurchases


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