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THE CAPITAL and CASH FLOW SOURCES and USES of INITIAL STOCK REPURCHASE FIRMS

Author

Listed:
  • Luís Krug Pacheco

    (Faculdade de Economia e Gestão, Universidade Católica Portuguesa - Porto)

  • Clara Raposo

    (ISCTE, Business School)

Abstract

This study investigates the capital sources and uses of firms that are conducting stock repurchase transactions for the first time, both prior and subsequent to those financial operations. We hypothesize that this capital and cash flow analysis may shed some light about the relative importance of some financial motivations and theoretical hypotheses in explaining initial stock repurchases. In particular, our findings support the risk reduction signaling and the dividends substitution hypotheses as the primary drivers for the initial stock repurchase decision. We also find that the importance of the most theoretical explanations and financial motivations vary according to whether initial repurchase firms are also conducting acquisitions and significant divestitures, distributing cash dividends, relying on external financing and using debt or cash reserves.

Suggested Citation

  • Luís Krug Pacheco & Clara Raposo, 2009. "THE CAPITAL and CASH FLOW SOURCES and USES of INITIAL STOCK REPURCHASE FIRMS," Working Papers de Gestão (Management Working Papers) 07, Católica Porto Business School, Universidade Católica Portuguesa.
    • Handle: RePEc:cap:mpaper:072009
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    References listed on IDEAS

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    More about this item

    Keywords

    Stock Repurchases; Initial Stock Repurchases; Sources of Financing; Cash Flow Distribution.;
    All these keywords.

    JEL classification:

    • 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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