The Determinants of Share Repurchases in Europe
33 Pages Posted: 28 Feb 2010 Last revised: 17 Jan 2019
Date Written: October 1, 2011
In this research paper we employ a logit model methodology in order to identify the determinants of a firm’s decision to announce a share repurchase. In the models, we incorporate firm specific financial characteristics and measures of share price performance. Hence, we are able to estimate the probability of open market share repurchase announcements across Europe. The robustness of the proposed models is investigated across different dimensions of sample construction methods and with a boot-strap technique. We find that leverage, size, and ownership concentration, have a significant impact on the announcement of share repurchases in all three countries under study. Finally, we construct a number of models with strong predicting ability of a firm’s likelihood to announce a share repurchase.
Keywords: Share repurchases, determinants, information asymmetry, free cash flow, undervaluation, probability, logit model, boot-strap
JEL Classification: G14, G32, G34, G35
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