Advances in Economics, Management and Political Sciences
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Proceedings of the 2022 International Conference on Financial Technology and Business Analysis (ICFTBA 2022), Part 1
Series Vol. 5 , 24 April 2023
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Impact of Stock Repurchase on the Capital Markets
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Abstract
This study intends to examine, from an economic and accounting standpoint, how the share repurchase procedure affect financial markets by specifically testing their effects on the financial performance of the specific companies. The OLS regression analysis was used on 66 companies that were traded on the American Stock Exchange between 2009 and 2020 as part of the study sample. The results reveal that share repurchases improve financial results, as evidenced by return on equity (ROE) and Added Economic Value (EVA). The results, however, show that share repurchases have little effect on the return on assets (ROA). The study found that the management's justifications for share buybacks affect a company's financial success. The study also found that the management's aim to produce a cash surplus improves the company's financial performance. The management objective of increasing earnings per share, which also improves the firm's financial success, was found to be one of the most significant motivations for the company to repurchase shares, according to the study. The study also showed that share repurchases significantly outperform returns on assets or returns on equity in terms of the Economic Value Added (EVA), one of the most important measures of financial success. The study, however, found little proof that the companies' share repurchases caused by higher financial leverage have an effect on their financial performance. This research, therefore, provided an insight on how share purchases affect the capital markets is dependent on the source of the surplus cash, and relatedly, share purchases through improved earnings per share increases the desirability of the company from their improving their financial standpoint.
Keywords
Stock Repurchases, Economic Value Added (EVA), Return On Equity (ROE), Return On Assets (ROA)
References
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Data Availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
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- Volume Title
- Proceedings of the 2022 International Conference on Financial Technology and Business Analysis (ICFTBA 2022), Part 1
- ISBN (Print)
- 978-1-915371-21-8
- ISBN (Online)
- 978-1-915371-22-5
- Published Date
- 24 April 2023
- Series
- Advances in Economics, Management and Political Sciences
- ISSN (Print)
- 2754-1169
- ISSN (Online)
- 2754-1177
- DOI
- 10.54254/2754-1169/5/20220062
- Copyright
- 24 April 2023
- Open Access
- This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited