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Are Share Repurchases Really Flexible?

Published online by Cambridge University Press:  28 March 2025

Heitor AlmeidaOpen the ORCID record for Heitor Almeida[Opens in a new window],
Ruidi Huang and
Yuhai Xuan
Heitor Almeida*
Affiliation:
University of Illinois at Urbana-Champaign Gies College of Business and NBER
Ruidi Huang
Affiliation:
Southern Methodist University Cox School of Business ruidih@smu.edu
Yuhai Xuan
Affiliation:
University of California Irvine Paul Merage School of Business yuhai.xuan@uci.edu
*
halmeida@illinois.edu (corresponding author)
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Abstract

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This article documents a trend of declining flexibility in share repurchase policies over the last 4 decades. We show that repurchases have become particularly sticky for firms with repurchase programs in place. We also exploit the additional inflexibility within existing repurchase programs to show that repurchase stickiness can have real effects for firms. Using the 2008 financial crisis as a shock to firms’ ability to raise capital, we find that firms with ongoing share repurchase programs ending after Dec. 2007 reduced investment, employment, and R&D spending by more than similar firms with programs ending before the onset of the crisis.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 61 , Issue 1 , February 2026, pp. 176 - 205
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2025. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

We thank Alice Bonaimé, Hemang Desai, Nuri Ersahin, Joan Farre-Mensa (the referee), Jarrad Harford (the editor), Jiekun Huang, Timothy Johnson, Charles Kahn, Minsu Ko, Andrew MacKinlay, Roni Michaely, William O’Brien, Joshua Pollet, and Michael Weisbach, as well as seminar participants at Monash University, the University of Illinois at Urbana-Champaign, the 2017 American Finance Association Annual Meeting poster session, the 2016 Financial Management Association Annual Meeting, the 2017 Midwest Finance Association Annual Meeting, the 2016 Northern Finance Association Annual Meeting, and the 2016 World Finance Conference for helpful discussions and comments.

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