Title：    The Effects of Legalizing Open Market Share Repurchases:International Evidence

Speaker:  Zigan Wang  Faculty of Business and Economics, University of Hong Kong

Assistant Professor

Time：    13:30-15:30, March 25

Location:  Room 236, School of Economics, Yuquan Campus

Abstract：

To causally identify the effects of legalizing the open market share repurchases on firm value and behaviors, we construct a unique dataset of 38 countries’ deregulation laws and utilize the yearly variation across the international market on the restrictions for identification. We first find that the legalization increases firm value and decreases firms’ cash holding. We then investigated several channels that firms may spend cash, and find that the legalization significantly reduces capital expenditure and activities on mergers and acquisitions. The effects on dividend payment are mixed: the dividend-to-net-income and dividend-to-sales ratios significantly decrease when not controlling for firm financials, but the relationships become insignificant after adding the controls. Meanwhile, firms’ purchase of treasury shares significantly increases. Overall, firms’ return on assets and the buy-and-hold return of the stocks increase. Some of our results from the new identification are consistent with the literature, while others differ, calling for more discussion in future research.