Are Buybacks Good for Long-Term Shareholder Value? Evidence from Buybacks around the World
74 Pages Posted: 26 Sep 2013 Last revised: 15 May 2017
Date Written: May 13, 2017
Using a sample of over 9,000 buyback announcements from 31 non-U.S. countries, we find support for the results of studies based on U.S. data: on average, share repurchases are associated with significant positive short-term and long-term excess returns. However, not all buybacks are the same: whether buybacks are good for long-term value depends on governance quality, as well as on whether buybacks have to be approved by boards or shareholders. Higher governance quality and board approval are associated with increases in shareholder value in the long run. We do not find that these long-term excess returns are simply a compensation for takeover risk or have disappeared in recent years.
Keywords: buyback, share repurchase, governance, market timing, agency problems, global regulation
JEL Classification: G3
Suggested Citation: Suggested Citation