The cost of financial flexibility: Evidence from share repurchases |
| |
| Affiliation: | 1. University of Arizona, Eller College of Management, 1130 East Helen St., Tucson, AZ 85721, United States;2. University of Kentucky, Gatton College of Business and Economics, 550 S Limestone, Lexington, KY 40506, United States;1. Georgetown University, USA;2. Northwestern University and NBER, USA;3. Sveriges Riksbank, Sweden;1. Leeds University Business School, University of Leeds, UK;2. School of Economics and Finance, Queen Mary University of London, UK;3. Department of Banking and Financial Management, University of Piraeus, Greece;4. Honorary Senior Visiting Fellow at Cass Business School, City University and Associate Research Fellow at Warwick Business School, University of Warwick, UK |
| |
| Abstract: | Over the last two decades, share repurchases have emerged as the dominant payout channel, offering a more flexible means of returning excess cash to investors. However, little is known about the costs associated with payout-related financial flexibility. Using a unique identification strategy, we document a significant cost. We find that actual repurchase investments underperform hypothetical investments that mechanically smooth repurchase dollars through time by approximately two percentage points per year on average. This cost of financial flexibility is correlated with earnings management, managerial entrenchment, and less institutional monitoring. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
