In search of stock repurchases determinants in listed Indonesian firms during regulatory changes

Moin, Abdul; Guney, Yilmaz; Kalak, Izidin El

Abstract

Motivated by the introduction of share repurchases regulations in 1998 and 2007 coupled with unique characteristics of the Indonesian market, we investigate the effect of firms’ sub-optimal financial position on their share repurchases decisions. Then, we study the effect of these determinants through an exogenous shock, the 2007 regulatory change. We show that sub-optimal financial positions play a role in the corporate share repurchases decisions. Further, we find that the enactment of the regulations has a significant effect on firms’ undertaking share repurchases programs. Unlike the common perception and findings in the literature, we observe that the underpricing of shares has a weak effect on the Indonesian firms’ decisions to repurchase their stocks. Our results hold using several estimation methods that account for potential endogeneity issues.

Citation

Moin, A., Guney, Y., & Kalak, I. E. (2020). In search of stock repurchases determinants in listed Indonesian firms during regulatory changes. Journal of Economic Behavior and Organization, 176, 145-165. https://doi.org/10.1016/j.jebo.2020.04.013

• Journal Article Type: Article
• Acceptance Date: Apr 12, 2020
• Online Publication Date: Jun 5, 2020
• Publication Date: 2020-08
• Deposit Date: Jun 3, 2020
• Publicly Available Date: Dec 6, 2021
• Journal: Journal of Economic Behavior & Organization
• Print ISSN: 0167-2681
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 176
• Pages: 145-165
• DOI: https://doi.org/10.1016/j.jebo.2020.04.013
• Keywords: Share repurchases; Regulations; Dividends; Sub-optimal decisions; Underpricing; Indonesia
• Public URL: https://hull-repository.worktribe.com/output/3515561
• Publisher URL: https://www.sciencedirect.com/science/article/abs/pii/S0167268120301268?via%3Dihub