Ownership structure and incentives to stock repurchase

Min Teng, Toyohiko Hachiya and 豊彦 蜂谷

No 110, Working Paper Series from Center for Japanese Business Studies (HJBS), Graduate School of Commerce and Management Hitotsubashi University

Abstract: This paper examines whether and how ownership structure affects stock repurchase by looking at the incentives to adjust capital structure and signal undervaluation through repurchasing. We find that a strong monitoring structure motivates the adoption of an optimal capital structure with which firms maximize corporate value. We also find that firms with a strong monitoring structure tend to initiate a repurchase plan as a value signal; on the other hand, entrenched firms are more sensitive to market performance and tend to have more stock repurchase if they are undervalued. Additionally, we find by looking at the motivation for sending a value-signal that a U-shaped relationship exists between stock repurchase and ownership structure.

Keywords: Ownership structure; Stock repurchase; Capital structure; Undervaluation; Takeover determent (search for similar items in EconPapers)
Date: 2010-04
New Economics Papers: this item is included in nep-bec
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