Stock Repurchases: Theory and Evidence

46 Pages Posted: 30 Apr 2009

See all articles by Jim Hsieh

Jim Hsieh

George Mason University

Qinghai Wang

University of Central Florida - College of Business Administration

Date Written: April 2009

Abstract

This article surveys the theoretical and empirical studies on share repurchases. Share repurchases have surpassed cash dividends and become the dominant form of corporate payouts since the last decade. This study provides a brief description of five major types of share repurchases and considers the motives that influence firms’ repurchase decisions. Specifically, we examine regulatory and tax considerations, agency costs of free cash flows, signaling and undervaluation, capital structure, takeover deterrence, and employee stock options. The review indicates that the existing literature provides ample support for several of these motivations while others merit further investigation. Few studies offer possible explanations for the phenomenon of increasing total payouts over time that is largely attributable to share repurchases.

Keywords: Share Repurchases, Stock Repurchases

JEL Classification: G35

Suggested Citation

Hsieh, Jim and Wang, Qinghai, Stock Repurchases: Theory and Evidence (April 2009). Available at SSRN: https://ssrn.com/abstract=1395943 or http://dx.doi.org/10.2139/ssrn.1395943

Jim Hsieh (Contact Author)

George Mason University ( email )

4400 University Dr, MSN 5F5
George Mason University
Fairfax, VA 22030
United States

Qinghai Wang

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

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