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Cash holdings and share repurchases: International evidence

Title
Cash holdings and share repurchases: International evidence
Authors
Lee B.S.Suh J.
Ewha Authors
서정원
Issue Date
2011
Journal Title
Journal of Corporate Finance
ISSN
0929-1199JCR Link
Citation
vol. 17, no. 5, pp. 1306 - 1329
Indexed
SSCI; SCOPUS WOS scopus
Abstract
In this study, we examine the patterns and determinants of share repurchases using firm-level data from seven major countries-Australia, Canada, France, Germany, Japan, the U.K., and the U.S.-over the period 1998-2006. We find that while non-U.S. firms do not repurchase shares as much as U.S. firms do, both U.S. and non-U.S. firms display a common set of share repurchase behaviors. For example, across countries, firms use share repurchases as a flexible means of distributing cash. More importantly, large cash holdings are significantly associated with the amount of share repurchases in all countries. There is evidence that large cash holdings held by repurchasing firms represent excess cash. Firms tend to experience substantial increases in cash holdings prior to share repurchase as a result of reductions in capital expenditures. Overall, our evidence lends support to two hypotheses: (i) firms discharge excess capital to reduce agency conflicts and (ii) firms use repurchases to distribute temporary cash flows. © 2011 Elsevier B.V.
DOI
10.1016/j.jcorpfin.2011.06.006
Appears in Collections:
경영대학 > 경영학전공 > Journal papers
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