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Share repurchases under economic policy uncertainty: Evidence from China

Author

Listed:
  • Huang, Chenghao
  • Luo, Chenyu
  • Kuang, Xuewen

Abstract

This study examines the impact of economic policy uncertainty (EPU) on open market share repurchases, addressing a gap in the literature regarding its signaling role in immature markets. Using quarterly data from Chinese listed firms between 2017 and 2022, our analysis reveals that higher EPU significantly increases both the likelihood and scale of repurchases, driven by heightened information asymmetry and stock price pressure, particularly for privately owned, high-tech, and R&D-intensive firms. EPU also extends repurchase program duration and enhances both announcement and long-term returns. Given the irreversibility of firms' prior investments, EPU exacerbates mispricing risk. Our findings highlight the signaling role of share repurchases in immature markets, in contrast to precautionary motives in developed markets. These findings provide new insights into managing economic policy uncertainty and offer implications for navigating uncertainty through open market share repurchases in immature capital markets.

Suggested Citation

  • Huang, Chenghao & Luo, Chenyu & Kuang, Xuewen, 2025. "Share repurchases under economic policy uncertainty: Evidence from China," Economic Modelling, Elsevier, vol. 144(C).
    • Handle: RePEc:eee:ecmode:v:144:y:2025:i:c:s0264999324003481
    DOI: 10.1016/j.econmod.2024.106991
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    More about this item

    Keywords

    Economic policy uncertainty; Share repurchases; Signaling motive; Precautionary motive; Payout policy;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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