Impact of Stock Repurchase Decision on Firm Performance: An Analysis of Pakistani Firms
DOI:
https://doi.org/10.58932/MULE0022Keywords:
EPS Growth, Firm's Performance, Capital Structure, Shareholders PresureAbstract
This study examined the long-term performance of the firm and the factors that influence a company’s decision to engage in stock repurchase. The intricate relationship between stock repurchase decisions and their impact on firm performance focuses on several key factors: financial position, stock price, shareholders pressure, EPS growth, investment opportunities, and financial position. Stock repurchases have become a common financial strategy, aiming to optimize their capital structure and enhance shareholders’ value. The outcome of this study provides valuable insight for corporate decision-makers, investors, and regulators, helping them better understand the intricate relationship between stock repurchase decisions and the financial health and strategic positioning of firms in a dynamic and competitive market environment.
References
Ahmad, D. S. ., Ahmad, D. A. ., Shair, W. ., & Bhatti, M. A. A. (2022). Unlocking Pakistan’s Youth Potential: A Comprehensive Analysis of Youth Development Indices and Strategic Alignment with the UN Sustainable Development Goals. Journal of Professional Research in Social Sciences, 9(2), 80–95.
Al Sharawi, H. H. M. (2022). The impact of the share buyback process on financial performance: An economic and accounting perspective. Evidence from Egypt. Investment Management and Financial Innovations, 19(1), 210-224.
Almeida, H., Fos, V., & Kronlund, M. (2016). The real effects of share repurchases. Journal of Financial Economics, 119(1), 168-185.
Baker, M., & Wurgler, J. (2000). The equity share in new issues and aggregate stock returns. The Journal of Finance, 55(5), 2219-2257.
Baker, M., & Wurgler, J. (2002). Market timing and capital structure. The journal of finance, 57(1), 1-32.
Bhojraj, S., Hribar, P., Picconi, M., & McInnis, J. (2009). Making sense of cents: An examination of firms that marginally miss or beat analyst forecasts. The journal of finance, 64(5), 2361-2388.
Brav, A., Graham, J. R., Harvey, C. R., & Michaely, R. (2005). Payout policy in the 21st century. Journal of financial economics, 77(3), 483-527.
Chao, C. H., & Huang, C. J. (2022). Firm performance following actual share repurchases: Effects of investment crowding out and financial flexibility. Pacific-Basin Finance Journal, 73, 101738.
Clarke, N., Norris, D., & Schrowang, A. (2024). Share repurchases and managerial reference points. Financial Review, 59(1), 57-87.
Di, H., & Marciukaityte, D. (2015). Earnings smoothing around open-market share repurchases. Review of Accounting and Finance, 14(1), 64-80.
Dittmar, A., & Field, L. C. (2015). Can managers time the market? Evidence using repurchase price data. Journal of Financial Economics, 115(2), 261-282.
Fama, E. F., & French, K. R. (2001). Disappearing dividends: Changing firm characteristics or lower propensity to pay? Journal of Financial economics, 60(1), 3-43.
Firer, C., Gilbert, E., & Maytham, A. (2008). Dividend policy in South Africa. Investment Analysts Journal, 37(68), 5-19.
Forti, C. A. B., & Peixoto, F. M. (2015). Determinant factors of dividend payments in Brazil. Revista Contabilidade & Finanças, 26, 167-180.
Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of accounting and economics, 40(1-3), 3-73.
Griffin, P. A., & Lont, D. H. (2024). Share Buybacks and Earnings Management: Replication and Extension.
Grullon, G., & Michaely, R. (2004). The information content of share repurchase programs. The Journal of Finance, 59(2), 651-680.
Hackbarth, D. (2008). Managerial traits and capital structure decisions. Journal of financial and quantitative analysis, 43(4), 843-881.
Ikenberry, D., Lakonishok, J., & Vermaelen, T. (1995). Market underreaction to open market share repurchases. Journal of financial economics, 39(2-3), 181-208.
Imam, M.A. et al. (2023) ‘Contextualizing research approaches: The role of Western and Islamic philosophies in shaping methodology and knowledge creation’, Al-Irfan, 8(16), pp. 69–90. doi:10.58932/mulb0029.
Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American economic review, 76(2), 323-329.
Kuntluru, S., & Chacko, K. T. (2019). Share Buybacks in India: An Empirical Analysis (No. 318).
Lie, E. (2005). On the timing of CEO stock option awards. Management Science, 51(5), 802-812.
Liljeblom, E., & Pasternack, D. (2006). Share repurchases, dividends and executive options: The effect of dividend protection. European Financial Management, 12(1), 7-28.
Mikkelson, W. H., & Partch, M. M. (1986). Valuation effects of security offerings and the issuance process. Journal of financial economics, 15(1-2), 31-60.
Miller, J. M., & Shankar, S. G. (2005). The effects of open-market stock repurchases by insurance companies. Journal of Insurance Issues, 167-182.
Purba, A. D. (2023, January). Firm’s Motive in Stock Repurchase. In Proceeding Medan International Conference on Economic and Business (MICEB) (Vol. 1, No. 1, pp. 49-56).
Reimers, J. L., & Singleton, J. C. (2010). Accounting meets strategy: Share repurchase programs. Strategic Finance, February.
Seetharaman, A., & Raj, J. R. (2011). An empirical study on the impact of earnings per share on stock prices of a listed bank in Malaysia. The International Journal of Applied Economics and Finance, 5(2), 114-126.
Stonham, P. (2002). A game plan for share repurchases. European Management Journal, 20(1), 37-44.
Vermaelen, T. (1981). Common stock repurchases and market signalling: An empirical study. Journal of financial economics, 9(2), 139-183.
Wållberg, F., & Anglemier, E. (2021). Factors influencing the share repurchase decision: A look into Nordic firms.
Wang, H. B., Nguyen, C., & Rafi, N. A. (2021). The effectiveness of price-stabilizing share buybacks: Evidence from listed firms in Vietnam. The North American Journal of Economics and Finance, 57, 101436.
Refer to Yardeni Research's Corporate Finance Briefing for 2021 regarding S&P 500 Buybacks & Dividends https://www.yardeni.com/pub/buybackdiv.pdf
Zhang, H. (2005). Share price performance following actual share repurchases. Journal of Banking & Finance, 29(7), 1887-1901.
