Share repurchases and institutional supply

DeLisle, Jared; Morscheck, Justin; Nofsinger, John R.

doi:10.1016/j.jcorpfin.2014.05.010

Cited by 15 publications

(1 citation statement)

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“…The higher the shareholding ratio of institutional investors, the smaller the deviation between the company’s target capital structure and the actual capital structure, and the faster the company adjusts its capital structure. Therefore, the supervision mechanism of institutional investors can better play the role of corporate governance, alleviate the conflict between shareholders and managers, and optimize the company’s dynamic capital structure decision–making [ 80 ]. The supervision and governance of institutional investors will affect the company’s equity incentive plan and optimize the company’s capital structure decision, so the company’s share repurchase will also have a more obvious effect on reducing the cost of capital.…”

Section: Heterogeneity Testmentioning

confidence: 99%

Share repurchase and the cost of capital: Discussion on the nature of share repurchase of Chinese listed companies

Wang,

Chen

2023

PLoS ONE

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Share repurchase is not only an important financial policy of the company, but also a financial policy with a very wide range of influence. A scientific and reasonable share repurchase policy has a significant financial effect in terms of an equity structure optimization, capital structure adjustment, cash holding control, and even management compensation system design. The long-standing share repurchase in the U.K. and U.S. companies and the recent practice of share repurchase by Chinese listed companies imply an important financial proposition: share repurchase is a high-quality financial policy that, when properly applied, will help reduce the cost of capital. The data in this study show that share repurchases can reduce the level of firms’ cost of capital and play an important role in enhancing their competitiveness. This study also finds that Chinese listed companies, when formulating and implementing share repurchase programs, do not subjectively view share repurchases as a policy tool to adjust cash holdings and capital structure. In addition, they do not view share repurchases as an alternative to cash dividends but use equity incentives for management as the main intention for share repurchases. This decision-making concept is not conducive to the rational use of share repurchase policies in the long run and should be a cause for concern in the business community. Finally, the leverage and the cash holding path are the main motives affecting share repurchases and are the important fundamental mechanisms in this study, while the mediating mechanism test finds that share repurchases mainly reduce the cost of capital through two information perspectives of analyst following and stock liquidity. The heterogeneity analysis shows that the role of share repurchases in reducing the cost of capital is more obvious in enterprises with fierce product market competition, high institutional investor shareholding.

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Section: Heterogeneity Testmentioning

confidence: 99%

Share repurchase and the cost of capital: Discussion on the nature of share repurchase of Chinese listed companies

Wang,

Chen

2023

PLoS ONE

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Taxing share repurchases

2022

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The cost of financial flexibility: Evidence from share repurchases

Bonaimé

Hankins

Jordan

2016

Journal of Corporate Finance

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Over the last two decades, share repurchases have emerged as the dominant payout channel, offering a more flexible means of returning excess cash to investors. However, little is known about the costs associated with payout-related financial flexibility. Using a unique identification strategy, we document a significant cost. We find that actual repurchase investments underperform hypothetical investments that mechanically smooth repurchase dollars through time by approximately two percentage points per year on average. This cost of financial flexibility is correlated with earnings management, managerial entrenchment, and less institutional monitoring.

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Share repurchases and institutional supply

Cited by 15 publications

References 50 publications

Share repurchase and the cost of capital: Discussion on the nature of share repurchase of Chinese listed companies

Share repurchase and the cost of capital: Discussion on the nature of share repurchase of Chinese listed companies

Taxing share repurchases

The cost of financial flexibility: Evidence from share repurchases

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