Corporate life cycle and share repurchases: Evidence from the Taiwan Stock Market

Abstract

This study investigated the relationship between corporate life cycle and the determinants of firms’ repurchasing decisions. Our sample firms were gathered from the Taiwan Stock Market over the period 2000 to 2009. This study used the life cycle descriptors and cluster analysis to determine firm years’ life cycle stages. The results showed that signaling information is the general reason for share repurchases, regardless of life cycle stages. In the growth stage, firms’ repurchase decisions may mix different motivations, including undervaluation information signaling. In the mature stages, firms not only distribute excess cash flow to stockholders but also signal information that agency problem will be reduced by repurchases. In the stagnant stage, the reasons for repurchase decisions are not explicit. Key words: Corporate life cycle, share repurchase, cluster analysis, logistic regression.