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Why do firms decide to stop their share repurchase programs?

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  • Mark Mietzner

    (Zeppelin University
    TU Darmstadt)

Abstract

We explore the distinguishing characteristics of firms that completed or ended share repurchase programs. Our findings help further understanding of the economic reasons for cancelling such programs. Based on a U.S. sample of 457 completed and 79 non-completed repurchase programs, we find a significant drop in systematic risk around completed buybacks. This suggests a response to deteriorating investment opportunities. In contrast, the systematic risk of non-completers decreases prior to the announcement, followed by an increase that peaks during the event period. This suggests that firms cancel their repurchase intentions when growth options move into the money.

Suggested Citation

  • Mark Mietzner, 2017. "Why do firms decide to stop their share repurchase programs?," Review of Managerial Science, Springer, vol. 11(4), pages 815-855, October.
    • Handle: RePEc:spr:rvmgts:v:11:y:2017:i:4:d:10.1007_s11846-016-0206-z
    DOI: 10.1007/s11846-016-0206-z
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    More about this item

    Keywords

    Share repurchase; Non-completed buybacks; Free cash flow; Real options; Investment opportunities;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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

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