The influence of undervaluation, free cash flow, leverage and dispersion of ownerships toward company’s stock repurchase (An empirical study of Indonesia stock exchange public listed companies)

Abstract

The objective of this research is to study the influence of undervaluation, free cash flow, leverage and dispersion of ownerships toward company’s stock repurchase (An empirical study of Indonesia stock exchange public listed companies). Many researchers have shown that the Stock repurchase is the best alternatives for the company to recover the decrease of stock value by doing ‘buyback’ the stock from the market which mostly caused by the negative sentiment, especially during the crisis. The research methodology approach has use 26 sample of manufacturing companies by using a purposive sampling method which means its sampling technique is based on the ‘sample criteria’. Samples are from the public listed companies which listed on Indonesia Stock Exchange (IDX) during the period of 2010–2014. The major criteria is that companies are consistently published their stock repurchase announcement. In order to conduct the hypothesis test, it use a multiple linear regression analysis to analyze the influence of independent variables undervaluation, free cash flow, leverage and dispersion of ownerships towards stock repurchase. The findings show that R-Square amount is 0.783, which means that the independent variables have influences of 78.3% toward its dependent variable. And, on F-test shows the significant simultaneous impact between undervaluation, free cash flow, leverage and dispersion of ownerships toward company’s stock repurchase. And, t-test only leverage, dispersion of ownerships has a partial influence toward company’s stock repurchase. Others, undervaluation, free cash flow shows negative and above significant level of (α), or more than the confidence level 95%. This study may contribute in providing an overview of the factors of undervaluation, free cash flow ownerships toward company’s stock repurchase in Indonesia which can be used by the managers and shareholders to take the decision making and also supporting the best fundamental preparation on stock repurchase.