Dedman, E, Hua, S and Kungwal, T ORCID: https://orcid.org/0000-0001-7481-948X (2021) Why Do UK Firms Repurchase Their Own Shares? SSRN Electronic Journal. (In Press)

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Abstract

We examine the practice of share repurchases in the UK. We find that an important regulatory reform in 2003, which relaxed previously strict rules about repurchases, was followed by a significant increase in repurchase activity by UK listed firms. However, unlike in the US, repurchases remain a small proportion of total distributions to shareholders. We test five key hypotheses from prior literature. Our analysis of a large sample of firms from 2000 to 2016 provides strong support, across both regulatory regimes, for both the free cash flow and the investment hypotheses. We find some support for both the undervaluation and the leverage/capital structure hypothesis in the first regime only. In contrast to the US, the dividend substitution hypothesis is not supported. In the UK, the extent of share repurchases remains relatively small, and they appear to be used as a complement to regular dividends, being made regularly, in an amount positively associated with dividends paid.

Item Type: Article
Additional Information: The final version of this article and all relevant information related to it, including copyrights, can be found on the publisher website this has been accepted with - International Journal of Banking, Accounting and Finance
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
H Social Sciences > HF Commerce > HF5410 Marketing. Distribution of products
Divisions: Faculty of Humanities and Social Sciences > Keele Business School
Depositing User: Symplectic
Date Deposited: 25 Feb 2022 13:15
Last Modified: 25 Feb 2022 13:15
URI: https://eprints.keele.ac.uk/id/eprint/10654

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