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Stock Repurchases in the 21st Century: Theory, Evicence and Implications

Objective

Stock repurchases are an important tool for returning cash back to shareholders. Since their regulation in the US in the mid 1980s, stock repurchases have experienced dramatic growth. EU countries, however, started allowing public corporations to buy back their shares only in the late 1990s. Moreover, firms in EU countries that do start repurchases fail complete them. For example, UK and French firms end up repurchasing only 28% and 10% of their declared intention, respectively, in comparison to about 80% in the US. Without good free cash payout mechanisms companies and markets cannot be efficient, and economies cannot thrive. Why do repurchases efficiently disburse cash in the US but not in the EU? What can be done to make repurchases work in EU countries? The purpose of this project is to help understand the properties and limitations of repurchases. The results will provide guidelines to governments how to regulate repurchases, to firms when to repurchase, and to investors how to adjust their investment strategies when firms they invest in announce a repurchase.

Field of science

  • /social sciences/economics and business/business and management/commerce

Call for proposal

FP7-PEOPLE-2007-4-3-IRG
See other projects for this call

Funding Scheme

MC-IRG - International Re-integration Grants (IRG)

Coordinator

TEL AVIV UNIVERSITY
Address
Ramat Aviv
69978 Tel Aviv
Israel
Activity type
Higher or Secondary Education Establishments
EU contribution
€ 100 000
Administrative Contact
Simon Benninga (Prof.)