Debt-financed repurchases and credit ratings with the respect of free cash flow and repurchase purpose

Ni-Yun Chen, Kun-Chih Chen and Chi-Chun Liu

The North American Journal of Economics and Finance, 2019, vol. 47, issue C, 23-36

Abstract: We find that the fraction of debt used to finance share repurchases is negatively associated with credit ratings. In particular, this association is more pronounced for firms with a high level of free cash flow. We further divide the sample by the repurchase purpose. We find that the associations between debt-financed repurchases, free cash flow, and credit ratings hold when the repurchase is made for the purpose of transferring shares to employees or for the purpose of equity conversion of convertible securities, but not when it is made for maintaining the company’s credit.

Keywords: Debt-financed repurchases; Free cash flow; Credit ratings (search for similar items in EconPapers)
JEL-codes: G30 G35 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062940818302778
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:47:y:2019:i:c:p:23-36

DOI: 10.1016/j.najef.2018.11.013

Access Statistics for this article

The North American Journal of Economics and Finance is currently edited by Hamid Beladi

More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().