Skip to main content

Research Repository

Advanced Search

Effects of Financial Constraints and Product Market Competition on Share Repurchases

Gyimah, Daniel; Siganos, Antonios; Veld, Chris

Authors

Daniel Gyimah

Chris Veld



Abstract

This study explores the importance of financial constraints and product market competition on the share repurchase decision. We find that financially constrained firms are more likely to conduct debt-financed share repurchases. Financially unconstrained firms, however, tend to conduct debt-financed repurchases only when debt market conditions are favourable. We also find that the level of industry competition is a significant factor behind managers’ decisions. High (low) industry competition forces financially unconstrained and undervalued firms to reduce (increase) the agency costs of free cash flows from overvalued debt financing. The implication is that firms in high-competition industries disburse excess cash through share repurchases. We find that this effect is strongest in periods outside financial crises.

Citation

Gyimah, D., Siganos, A., & Veld, C. (2021). Effects of Financial Constraints and Product Market Competition on Share Repurchases. Journal of International Financial Markets, Institutions and Money, 74, Article 101392. https://doi.org/10.1016/j.intfin.2021.101392

Journal Article Type Article
Acceptance Date Jul 17, 2021
Online Publication Date Jul 30, 2021
Publication Date 2021-09
Deposit Date Jul 19, 2021
Publicly Available Date Jul 31, 2022
Journal Journal of International Financial Markets, Institutions & Money
Print ISSN 1042-4431
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 74
Article Number 101392
DOI https://doi.org/10.1016/j.intfin.2021.101392
Keywords Cross-market arbitrage, share repurchases, financial constraints, product market competition
Public URL http://researchrepository.napier.ac.uk/Output/2787761

Files

Effects Of Financial Constraints And Product Market Competition On Share Repurchases (accepted version) (752 Kb)
PDF

Licence
http://creativecommons.org/licenses/by-nc-nd/4.0/

Copyright Statement
Accepted version licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) license.





You might also like



Downloadable Citations