In Search of Stock Repurchases Determinants in Listed Indonesian Firms during Regulatory Changes
47 Pages Posted: 29 Jun 2020
Date Written: June 3, 2020
Motivated by the introduction of share repurchases regulations in 1998 and 2007 coupled with unique characteristics of the Indonesian market, we investigate the effect of firms’ sub-optimal financial position on their share repurchases decisions. Then, we study the effect of these determinants through an exogenous shock, the 2007 regulatory change. We show that sub-optimal financial positions play a role in the corporate share repurchases decisions. Further, we find that the enactment of the regulations has a significant effect on firms’ undertaking share repurchases programs. Unlike the common perception and findings in the literature, we observe that the underpricing of shares has a weak effect on the Indonesian firms’ decisions to repurchase their stocks. Our results hold using several estimation methods that account for potential endogeneity issues.
Keywords: Share repurchases; regulations; dividends; sub-optimal decisions; underpricing; Indonesia
JEL Classification: G32, G35
Suggested Citation: Suggested Citation