Determinants and consequences of share repurchases: Evidence from U.S. public firms

https://doi.org/10.35912/gams.v2i2.3668
Published: Nov 21, 2025

Abstract:

Purpose: This study investigates the underlying motivations behind share repurchases by U.S. companies and evaluates their impact on firm performance. It specifically explores financial conditions, managerial incentives, and market-related factors that drive buyback decisions, as well as the short- and long-term consequences for shareholders.

Methodology/Approach: A quantitative, deductive approach is applied using data from publicly listed U.S. firms. Secondary data are sourced from Compustat, CRSP, ExecuComp, Bloomberg, and SEC filings. The analysis employs panel regressions, event-study methods, and multiple robustness checks conducted with statistical software such as Stata or R.

Results/Findings: The findings indicate that free cash flow availability and perceived stock undervaluation are the most influential determinants of repurchases. Buyback announcements produce positive short-term market reactions, and firms demonstrate subsequent improvements in ROE and EPS. Nevertheless, share repurchases do not consistently enhance long-term abnormal stock returns. The results also show no significant reduction in investment, R&D, or employment, implying that buybacks are typically financed through excess liquidity.

Conclusions: Share repurchases primarily function as a mechanism for capital allocation rather than a substitute for productive investment. While they generate short-term value for shareholders, their long-term effects tend to be neutral.

Limitations: The study is restricted to U.S. firms and a specific time frame, and endogeneity concerns remain despite methodological controls.

Contribution: This research advances understanding of buyback motives and outcomes, offering insights for managers, investors, and policymakers in evaluating repurchase strategies.

Keywords:
1. Event Study
2. Financial Performance
3. Free Cash Flow
4. Share Repurchase
5. Signaling Theory
Authors:
1 . Md Minar Hossain
University of Dhaka, Dhaka, Bangladesh
2 . Umme Zinia Zahan Nodia
Trine University, USA
3 . Falguni Rahman
University of Dhaka, Dhaka, Bangladesh
4 . Md Mehedi Hasan Antor
National University, Bangladesh
5 . Mohammad Tahmid Ahmed
American International University-Bangladesh (AIUB), Dhaka, Bangladesh
6 . Farhana Akter Priya
University of Dhaka, Dhaka, Bangladesh
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How to Cite
Hossain, M. M. ., Nodia, U. Z. Z. ., Rahman, F. ., Antor, M. M. H. ., Ahmed, M. T. ., & Priya , F. A. . (2025). Determinants and consequences of share repurchases: Evidence from U.S. public firms. Global Academy of Multidisciplinary Studies, 2(2), 121–140. https://doi.org/10.35912/gams.v2i2.3668
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Vol. 2 No. 2 (2025): November
Articles
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References

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    Ali, E., & Ayelign, A. (2022). The Impacts Of Port Characteristics And Port Logistics Integration On Port Performance In Ethiopian Dry Ports. International Journal of Financial, Accounting, and Management, 4(2), 163-181. doi:https://doi.org/10.35912/ijfam.v4i2.709

    Almeida, H., Fos, V., & Kronlund, M. (2016). The real effects of share repurchases. Journal of financial economics, 119(1), 168-185. doi:https://doi.org/10.1016/j.jfineco.2015.08.008

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    Huang, G.-C., Liano, K., & Pan, M.-S. (2023). Open-market stock repurchases, insider trading, and price informativeness. Review of Quantitative Finance and Accounting, 60(4), 1495-1513. doi:https://doi.org/10.1007/s11156-023-01142-7

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    Mashruwala, C., & Mashruwala, S. (2025). EPS?motivated share repurchases and wealth transfer. Journal of Business Finance & Accounting, 52(2), 722-749. doi:https://doi.org/10.1111/jbfa.12826

    Nohel, T., & Tarhan, V. (1998). Share repurchases and firm performance:: new evidence on the agency costs of free cash flow. Journal of financial economics, 49(2), 187-222. doi:https://doi.org/10.1016/S0304-405X(98)00022-1

    Rahman, S. A. Y., Rahayu, A., & Hendrayati, H. (2025). Digital marketing evolution: Understanding the role of AI and Big Data in shaping marketing strategies. International Journal of Financial, Accounting, and Management, 7(2), 197-211. doi:https://doi.org/10.35912/ijfam.v7i2.2593

    Roy, S. K. (2022). The Impact Of Age, Gender, And Ethnic Diversity On Organizational Performance: An Empirical Study Of Bangladesh's Banking Sector. International Journal of Financial, Accounting, and Management, 4(2), 145-161. doi:https://doi.org/10.35912/ijfam.v4i2.905

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  2. Adiza, G. R., Alamina, U. P., & Aliyu, I. S. (2020). The influence of socio-cultural factors on the performance of female entrepreneurs. International Journal of Financial, Accounting, and Management, 2(1), 13-27. doi:https://doi.org/10.35912/ijfam.v2i1.161
  3. Alderson, M. J., Halford, J. T., & Sibilkov, V. (2020). An examination of the wealth effects of share repurchases on bondholders. Journal of Corporate Finance, 65, 101499. doi:https://doi.org/10.1016/j.jcorpfin.2019.101499
  4. Ali, E., & Ayelign, A. (2022). The Impacts Of Port Characteristics And Port Logistics Integration On Port Performance In Ethiopian Dry Ports. International Journal of Financial, Accounting, and Management, 4(2), 163-181. doi:https://doi.org/10.35912/ijfam.v4i2.709
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  6. Alves, H., Canadas, N., & Rodrigues, A. M. (2015). Determinants of share price and share liquidity: An analysis using a SEM model. Procedia Economics and Finance, 25, 318-331. doi:https://doi.org/10.1016/S2212-5671(15)00742-X
  7. Andreou, P. C., Cooper, I., de Olalla Lopez, I. G., & Louca, C. (2018). Managerial overconfidence and the buyback anomaly. Journal of Empirical Finance, 49, 142-156. doi:https://doi.org/10.1016/j.jempfin.2018.09.005
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  9. Banyi, M. L., Dyl, E. A., & Kahle, K. M. (2008). Errors in estimating share repurchases. Journal of Corporate Finance, 14(4), 460-474. doi:https://doi.org/10.1016/j.jcorpfin.2008.06.004
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  11. Brockman, P., Lee, H. S., & Salas, J. M. (2023). Share Repurchases and Investment Policies. Financial Review. doi:https://doi.org/10.1111/fire.70032
  12. Buffa, A. M., & Hodor, I. (2023). Institutional investors, heterogeneous benchmarks and the comovement of asset prices. Journal of financial economics, 147(2), 352-381. doi:https://doi.org/10.1016/j.jfineco.2022.11.002
  13. Capizzi, V., & Giovannini, R. (2011). In search for the determinants of share repurchases policies in the Italian equity capital market: An event study. CORPORATE BOARD, 7(1), 33-47. doi:https://doi.org/10.22495/cbv7i1art3
  14. Chan, K., Ikenberry, D. L., Lee, I., & Wang, Y. (2010). Share repurchases as a potential tool to mislead investors. Journal of Corporate Finance, 16(2), 137-158. doi:https://doi.org/10.1016/j.jcorpfin.2009.10.003
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  16. Chen, S.-S., & Wang, Y. (2012). Financial constraints and share repurchases. Journal of financial economics, 105(2), 311-331. doi:https://doi.org/10.1016/j.jfineco.2012.03.003
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  18. Cziraki, P., Lyandres, E., & Michaely, R. (2021). What do insiders know? Evidence from insider trading around share repurchases and SEOs. Journal of Corporate Finance, 66, 101544. doi:https://doi.org/10.1016/j.jcorpfin.2019.101544
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  23. El Ghoul, S., Guedhami, O., Kim, H., & Suh, J. (2024). The persistence and consequences of share repurchases. Journal of Business Finance & Accounting, 51(1-2), 431-472. doi:https://doi.org/10.1111/jbfa.12699
  24. Faniband, M., & Prakasam, C. K. (2019). Determinants of differential voting rights share prices and ordinary share prices: Evidence from dual-class companies in India. Indian Journal of Research in Capital Markets, 6(4), 36-49. doi:https://doi.org/10.17010/ijrcm/2019/v6/i4/150270
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  26. Guest, N., Kothari, S., & Venkat, P. (2023). Share repurchases on trial: Large?sample evidence on share price performance, executive compensation, and corporate investment. Financial Management, 52(1), 19-40. doi:https://doi.org/10.1111/fima.12415
  27. Huang, G.-C., Liano, K., & Pan, M.-S. (2023). Open-market stock repurchases, insider trading, and price informativeness. Review of Quantitative Finance and Accounting, 60(4), 1495-1513. doi:https://doi.org/10.1007/s11156-023-01142-7
  28. Kurt, A. C. (2018). Managing EPS and signaling undervaluation as a motivation for repurchases: The case of accelerated share repurchases. Review of Accounting and Finance, 17(4), 453-481. doi:https://doi.org/10.1108/RAF-05-2017-0102
  29. Mashruwala, C., & Mashruwala, S. (2025). EPS?motivated share repurchases and wealth transfer. Journal of Business Finance & Accounting, 52(2), 722-749. doi:https://doi.org/10.1111/jbfa.12826
  30. Nohel, T., & Tarhan, V. (1998). Share repurchases and firm performance:: new evidence on the agency costs of free cash flow. Journal of financial economics, 49(2), 187-222. doi:https://doi.org/10.1016/S0304-405X(98)00022-1
  31. Rahman, S. A. Y., Rahayu, A., & Hendrayati, H. (2025). Digital marketing evolution: Understanding the role of AI and Big Data in shaping marketing strategies. International Journal of Financial, Accounting, and Management, 7(2), 197-211. doi:https://doi.org/10.35912/ijfam.v7i2.2593
  32. Roy, S. K. (2022). The Impact Of Age, Gender, And Ethnic Diversity On Organizational Performance: An Empirical Study Of Bangladesh's Banking Sector. International Journal of Financial, Accounting, and Management, 4(2), 145-161. doi:https://doi.org/10.35912/ijfam.v4i2.905
  33. Sergey, I. (2019). Pension reform 2019: determinants, consequences, alternatives. ??????????????? ?????????, 6(5), 4-44.
  34. Suhadi, I. A. (2024). Impact of intellectual capital on financial performance with company size moderation. International Journal of Financial, Accounting, and Management, 6(1), 47-59. doi:https://doi.org/10.35912/ijfam.v6i1.1833
  35. Taylor, G., & Tyers, R. (2017). Secular stagnation: Determinants and consequences for Australia. Economic Record, 93(303), 615-650. doi:https://doi.org/10.1111/1475-4932.12357
  36. Wadud, M. A. (2017). Determinants of share prices of listed commercial banks in Bangladesh. Available at SSRN 3106243. doi:https://dx.doi.org/10.2139/ssrn.3106243
  37. Wang, Z., Yin, Q. E., & Yu, L. (2021). Global Share Repurchases Over the Business Cycle. Available at SSRN 3791110. doi:https://dx.doi.org/10.2139/ssrn.3791110
  38. Zhang, H. (2005). Share price performance following actual share repurchases. Journal of Banking & Finance, 29(7), 1887-1901. doi:https://doi.org/10.1016/j.jbankfin.2004.06.038