What is it about?
Share repurchases have become a significant global transaction and skepticism persists about their ambiguous effect on investment. We enter this debate motivated by inconclusive relevant empirical evidence and the remarkable evolution of share repurchases in Japan.
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Why is it important?
This study document a negative relationship consistent with the notion that firms curtail repurchases in the presence of investment spending and vice versa.
Perspectives
This study holds crucial significance as it navigates the complex relationship between share repurchases and investment within the context of the evolving Japanese market. By uncovering a negative correlation between these practices, it addresses the ongoing debate surrounding the impact of share buybacks on investment decisions. The findings, particularly considering varying factors like financing constraints, growth opportunities, and cross-shareholdings, offer valuable insights into how firms prioritize and adjust their investment strategies concerning share repurchases. Furthermore, by spotlighting the influence of unique market traits like cross-shareholdings, this study contributes to a deeper understanding of how specific market dynamics shape the interplay between investment and share repurchases. Understanding these dynamics is crucial for investors, policymakers, and corporate leaders seeking to comprehend the implications of share buybacks on investment strategies, especially within markets characterized by distinctive features like Japan's cross-shareholding tradition.
Dr. Dimitrios Konstantios
Alba Graduate Business School, The American College of Greece
Read the Original
This page is a summary of: The integration of share repurchases into investment decision-making: Evidence from Japan, International Review of Financial Analysis, November 2021, Elsevier,
DOI: 10.1016/j.irfa.2021.101950.
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