An overview of share buybacks: A descriptive case from Malaysia

Abstract

This paper reviews the trends and motivations of share buyback programs and highlights the different hypotheses that motivate companies to repurchase their shares. It then explores the share buyback phenomena among Malaysian listed firms during the years from 2010 to 2015. The paper also investigates whether the Malaysian listed firms use share buyback programs to manage their earnings. Based on our manually collected data, we find that 836 firms engage in share buybacks during the period from 2010 to 2015. We employ the criteria of Hribar et al. (2006) to check whether share buyback strategies were used to manipulate earnings per share (i.e. accretive share buyback). We find that more than 75% of firms engage in accretive share buybacks at least one time during the period. Specifically, those firms undertake 637 accretive share buybacks with a value of RM 7.650 billion. This paper contributes to a better understanding of share buyback strategies in general and accretive share buybacks in the Malaysian context. Finally, our findings provide a reference point for relevant parties to improve the applicable regulations of share buyback schemes.