Global Share Repurchases Over the Business Cycle

Abstract

Using a dataset that covers details of repurchase cases across the globe, we comprehensively analyze how repurchase motives, details, and consequences vary over the business cycle. We find that in economic recession, firms buy back stocks to bring up undervalued stock price or to enhance market liquidity, and their repurchase announcements are accompanied by higher short-term stock returns and a lower completion rate. In expansion periods, firms repurchase to distribute excess cash; their announcements are followed by less inefficient investment, higher long-term returns and a higher completion rate.