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Identifier to cite or link to this item: https://hdl.handle.net/10086/18429

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Title
The Pump-Priming Effect of Regulatory Reform on Stock Repurchases : Evidence from Lifting the Ban on Treasury Stocks in Japan
Creator
Creator Name
Teng, Min Teng, Min
Affiliation
Affiliation Name
Tokyo Institute of Technology
Creator Name
Hachiya, Toyohiko Hachiya, Toyohiko
蜂谷, 豊彦 蜂谷, 豊彦
Affiliation
Affiliation Name
Hitotsubashi University
Key Word
Treasury stocks
Undervaluation
Takeover deterrence
Capital structure
Cash distribution
Abstract
This study investigates corporate reactions to the deregulation of stock repurchases set forth on 1 October 2001, in Japan, by looking at the motivations for stock repurchases. We found that stock repurchases increased significantly after the ban on treasury stocks was lifted. Our results show that firms with free-cash flow problems initiated a repurchase plan to distribute excess cash to shareholders and reduce agency costs over the sample period. In addition, firms who wanted to signal undervaluation also undertook stock repurchases over the sample period. These firms were affected by the deregulation, unlike firms that repurchase to reduce agency costs. We determined that firms with weak incentives to signal undervaluation increased stock repurchases significantly in order to respond to the deregulation, since these firms had the ability to take advantage of treasury stock purchases.
Publisher
Graduate School of Commerce and Management Center for Japanese Business Sutdies, Hitotsubashi University
Issued Date
2010-04
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
Working paper ; No. 109
Number of Pages
17
Appears in Collections
Working Paper Series / Center for Japanese Business Studies
URL
https://hdl.handle.net/10086/18429