Why Do Stock Repurchases Change Over Time?

European Financial Management, Forthcoming

29 Pages Posted: 11 Jan 2020 Last revised: 23 Nov 2020

See all articles by Yuan-Teng Hsu

Yuan-Teng Hsu

Shanghai Business School

Chia-Wei Huang

National Taiwan Normal University

Date Written: November 20, 2019

Abstract

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

Hsu, Yuan-Teng and Huang, Chia-Wei, Why Do Stock Repurchases Change Over Time? (November 20, 2019). European Financial Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3507587 or http://dx.doi.org/10.2139/ssrn.3507587

Yuan-Teng Hsu (Contact Author)

Shanghai Business School ( email )

Shanghai
China

Chia-Wei Huang

National Taiwan Normal University ( email )

No. 162, Section 1
Heping East Road
Taipei City, Da’an District 106
Taiwan

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