We investigate the cost of debt effects for firms that manage earnings per share (EPS) through abnormal share repurchases. Although prior research finds a significant cost of debt decrease for firms that meet earnings benchmarks, our results suggest that firms using the abnormal share repurchase strategy realize no cost of debt decrease associated with meeting earnings benchmarks. We find some evidence of a smaller decrease in cost of debt associated with measures of abnormal decreases in cash flows but weak evidence for measures that are cash flow increasing. We also find that the effect of using abnormal stock repurchases to meet earnings benchmarks leads to smaller reductions in the cost of debt when compared with the cost reduction when earnings benchmarks are met through accruals management. This study extends prior literature regarding the effects on the cost of debt through alternative strategies to meet earnings benchmarks and will be of interest to managers as they consider the impact of their managerial decisions.

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