Share repurchases and firm innovation

Nguyen, Lily; Vu, Le; Yin, Xiangkang

doi:10.1111/acfi.12641

Cited by 11 publications

(9 citation statements)

References 100 publications

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“…Similarly, Nguyen et al (2020a) document a negative relationship between share repurchases and firm innovation. Share repurchases reduce internal cash reserves, and can increase the threat of the firm being a takeover target by revealing to potential bidders its lack of growth opportunities or its underperforming assets.…”

Section: Corporate Cash Holdings and Innovationmentioning

confidence: 95%

Financial reporting and corporate innovation: a review of the international literature

Huang

Habib

Sun

et al. 2021

Accounting & Finance

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We synthesise the empirical studies on innovation in the accounting, finance, and corporate governance disciplines using Bushman and Smith's corporate transparency framework as our theoretical lens. The review presents competing findings on the association between financial reporting and innovation. Most of the reviewed studies fail to address the critical question of how the financial reporting system affects the interactions among financial development, corporate governance and innovation. We suggest future research, ranging from enriching the theoretical perspectives to incorporating the future of innovation research in the COVID-19 environment.

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Section: Corporate Cash Holdings and Innovationmentioning

confidence: 95%

Financial reporting and corporate innovation: a review of the international literature

Huang

Habib

Sun

et al. 2021

Accounting & Finance

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“…Nguyen et al . (2021) further indicate that firms trade off innovation and long‐term performance for share repurchases.…”

Section: Theory and Backgroundmentioning

confidence: 98%

The relationship between stock repurchase completion rates, firm reputation and financial reporting quality: a commitment‐trust theory perspective

Bhandari

Golden

Walker

et al. 2021

Accounting & Finance

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In this study, we examine firms' commitment to stock repurchase announcements as a proxy for trust within the investing community. Using a commitment‐trust theory perspective, we show that firms with higher repurchase (share buyback) completion rates have higher financial reporting quality. We proxy financial reporting quality using a composite measure of financial reporting aggressiveness and also using management’s propensity to meet or beat analysts' expectations. These firms mitigate (enhance) the negative (positive) effect of repurchases on financial reporting quality. Higher completion rates mitigate the negative effect of accretive stock repurchase on financial reporting quality. Further results show that higher corporate governance and financial constraints dampen this relationship between completion rates and financial reporting quality. Our results, which are robust to various sensitivity tests, indicate that higher stock repurchase completion rates reflect good business morality and a firm’s commitment to its investors, as exhibited by higher financial reporting quality.

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“…The key dependent variable for our analysis is the amount of open market share repurchases in the UK, in natural logarithms (L. Nguyen, Vu, & Yin, 2020 19). Some companies went through an increase of independent directors and did share repurchases in the Higgs period, and others did not, which allows us to test the effect of independent directors on share repurchases with a robust empirical method.…”

Section: Variablesmentioning

confidence: 99%

Share Repurchases and Board Independence

Grosman,

Amore

2021

SSRN Journal

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Share repurchases have come under criticism as they may be used for earnings management and take capital away from productive investment. However, share repurchases can also reduce the agency costs of free cash flow and offset the dilution of current shareholders. Whether firms engage in good or manipulative share repurchases can crucially hinge on the quality of corporate governance. Using UK firm panel data, we study the effect of independent directors on repurchase policies. Our results indicate that board independence increases the propensity to engage in share repurchases. Moreover, board independence attenuates the harmful effect of manipulative share repurchases on employment growth. Our approach exploits the passage of a corporate governance reform which provided a unique opportunity to tease out the causal impact of independent directors on share repurchases. Our findings advocate in favor of more active involvement of independent directors in payout policies.

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Share repurchases and firm innovation

Cited by 11 publications

References 100 publications

Financial reporting and corporate innovation: a review of the international literature

Financial reporting and corporate innovation: a review of the international literature

The relationship between stock repurchase completion rates, firm reputation and financial reporting quality: a commitment‐trust theory perspective

Share Repurchases and Board Independence

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