The Bright Side of Stock Repurchases
55 Pages Posted: 23 Jun 2016 Last revised: 17 Aug 2019
Date Written: November 12, 2017
I provide evidence of actual stock repurchases increasing future investment in firms subject to strong asymmetric information that are reliant on external capital markets. To address endogeneity, I use an instrumental variables approach based on price pressures created by mutual funds' liquidity needs. The results are consistent with firms using actual repurchases to signal their type, which eases access to capital markets and ultimately improves real outcomes.
Keywords: Stock Repurchases, Investment, Instrumental Variables
JEL Classification: G32, G35
Suggested Citation: Suggested Citation