Effects of Legalizing Open Market Share Repurchases: International Evidence

Zigan Wang and Luping Yu

Journal of Law, Finance, and Accounting, 2021, vol. 6, issue 1, 125-177

Abstract: By constructing a unique dataset of deregulation laws from 38 countries and utilizing yearly variation in law passage for these markets, we causally identify the effects of legalizing open market share repurchases. After legalization, treasury shares and stock repurchases increase, while dividend, cash holding, capital expenditure, and acquisitions decrease, leading to an increase in post-legalization stock returns and firm value. The effects are weaker in countries with trading restrictions, in countries with lower net tax rates on dividends, for firms with higher target payout ratios, and for financially constrained firms. No macro variables are found to predict the timing of legalization.

Keywords: Share repurchases; firm value; firm investment; cash holding; payout policy (search for similar items in EconPapers)
JEL-codes: G32 G35 G38 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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