Precautionary versus Signalling Motive of Share Repurchases: Evidence from Policy Uncertainty and the COVID‐19 Crisis
研究发现政策不确定性高时，企业公开市场股票回购的可能性、短期市场反应和完成率均降低，但事前被低估的企业反而增加回购；COVID-19期间财务受限或现金流波动大的企业回购减少，而被低估企业回购更多。
Abstract Using policy‐related uncertainty as a shock to firms’ internal and external financing frictions, we find significantly lower repurchase likelihoods, short‐term market reactions, and post‐announcement completion rates of open market share repurchases during periods of high policy uncertainty. Firms are more likely to switch from a high‐ to a low‐commitment repurchase technique when policy uncertainty is high. In contrast, for firms that are significantly undervalued ex ante, higher policy uncertainty leads to more repurchase activities. In addition, we show that the COVID‐19 crisis is associated with a lower repurchase likelihood for financially constrained firms or those with high cash flow volatility, while undervalued firms repurchased more shares during the pandemic period. Our results are robust after controlling for potential sources of endogeneity and conducting a battery of robustness tests. Collectively, our evidence suggests that the relationship between uncertainty and share repurchases is conditional on institutional contexts. Firms’ level of financial flexibility, their demand for signalling, and the credibility and magnitude of repurchase signals all significantly affect their precautionary and signalling motives.