Why Do Stock Repurchases Change Over Time?
European Financial Management, Forthcoming
29 Pages Posted: 11 Jan 2020 Last revised: 15 Mar 2022
Date Written: November 20, 2019
Recent studies have shown the time trends of firm stock repurchase behavior. We examine these time changes for stock repurchase through the lens of real activities earnings management. Managers appear more likely to manipulate earnings through stock repurchases since the passage of the Sarbanes–Oxley Act (SOX) in 2002. Furthermore, suspect firms that just missed analyst earnings per share forecasts have higher incentives to manipulate earnings through stock repurchases. The results are not driven by changes in corporate governance associated with the passage of SOX. Overall, our results suggest earnings management can be a significant determinant of the dynamics of stock repurchases.
Keywords: Stock repurchase, earnings management, Sarbanes–Oxley Act
JEL Classification: G18; G31; G35; G38
Suggested Citation: Suggested Citation