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 journalArticlepeer-review


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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