Why Do Firms Repurchase Stock?

Posted: 4 Jul 2000

See all articles by Amy K. Dittmar

Amy K. Dittmar

University of Michigan at Ann Arbor - The Stephen M. Ross School of Business

Abstract

In this paper, I investigate the relations between stock repurchases and distribution, investment, capital structure, corporate control, and compensation policies over the 1977-96 period. I allow the significance of each motive to change over time to account for adjustments in the percentage of firms influenced by each motive. I find that, throughout the sample period, firms repurchase stock to take advantage of potential undervaluation and, in many periods, to distribute excess capital. However, firms also repurchase stock during certain periods to alter their leverage ratio, fend off takeovers, and counter the dilution effects of stock options.

JEL Classification: G32, G35

Suggested Citation

Dittmar, Amy, Why Do Firms Repurchase Stock?. The Journal of Business, Vol. 73, Issue 3, July 2000. Available at SSRN: https://ssrn.com/abstract=229170

Amy Dittmar (Contact Author)

University of Michigan at Ann Arbor - The Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-764-3108 (Phone)

HOME PAGE: http://webuser.bus.umich.edu/adittmar/

Register to save articles to
your library

Register

Paper statistics

Abstract Views
3,163
PlumX Metrics