Abstract
After the policy was released in 2018, listed companies increased the frequency and amount of repurchases. Some studies believe that managers will give up long-term investment which is beneficial to the sustainable development of enterprises due to the short-term performance response caused by share repurchases. This paper took the repurchase firms in the high-tech industry from 2008 to 2018 as samples, it is found that the company’s share repurchase promotes R&D expenditure and will not reduce expenditure in R&D for short-term stock price reaction. Furthermore, the heterogeneity study found that in state-owned firms, the company’s share buybacks have a more significant role in promoting R&D expenditure.
Highlights
After the CSRC issued the opinions on supporting the repurchase of shares by listed companies in 2018, listed companies frequently repurchase shares
As share repurchase will cause the stock price to rise in a short term, it is conducive to the short-term performance of firms
The control variables include the return on assets (ROA) measured by net profit after tax / total assets, corporate cash flow level (Cash) measured by log of corporate cash flow, sales growth rate (Growth)
Summary
After the CSRC issued the opinions on supporting the repurchase of shares by listed companies in 2018, listed companies frequently repurchase shares. Some scholars have pointed out that the sake of such short-term interests, company managers will abandon valuable investments or reduce R&D expenditure that is conducive to the long-term development of firms (Shane, 2019) [5]. Will the high-tech industry reduce corporate R&D expenditure for this short-term benefit?. Based on the data of 7163 repurchases from 2008 to 2018, this paper uses logit regression model to study whether companies will reduce their investment in R&D due to repurchases in high-tech industries. Different from the research findings of Shane (2019) [5], this paper finds that in the high-tech industry, companies will not reduce their investment in R&D due to share repurchases. Current research finds that listed companies use repurchases in exchange for R&D expenditure, but this paper finds that listed companies in the high-tech industry do not have short-term performance in exchange for long-term corporate development. The share repurchase of listed companies is positively correlated with R&D
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