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The integration of share repurchases into investment decision-making: Evidence from Japan

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  • Apergis, Nicholas
  • Chasiotis, Ioannis
  • Georgantopoulos, Andreas G.
  • Konstantios, Dimitrios

Abstract

Share repurchases have become a significant global transaction and skepticism persists about their ambiguous effect on investment. We enter this debate motivated by inconclusive relevant empirical evidence and the remarkable evolution of share repurchases in Japan. Accordingly, we explore the investment-share repurchases nexus using panel data from Japanese listed firms between 2000 and 2019. We document a negative relationship consistent with the notion that firms curtail repurchases in the presence of investment spending and vice versa. We establish this contention by using subsamples stratified according to financing constraints, growth opportunities and cross-shareholdings. The findings endure after controlling for self-selection, endogeneity and heterogeneity and suggest that firms' investment decision precedes share repurchases which are adjusted accordingly. The results highlight how the widely criticized feature of cross-shareholdings, which is a distinct trait of the Japanese market, affects the integration of share repurchases into investment decision making.

Suggested Citation

  • Apergis, Nicholas & Chasiotis, Ioannis & Georgantopoulos, Andreas G. & Konstantios, Dimitrios, 2021. "The integration of share repurchases into investment decision-making: Evidence from Japan," International Review of Financial Analysis, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:finana:v:78:y:2021:i:c:s1057521921002714
    DOI: 10.1016/j.irfa.2021.101950
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    More about this item

    Keywords

    Share repurchases; Corporate investment; Japan; Corporate payout policy; Corporate governance; Financial flexibility;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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