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Investment Opportunities and Share Repurchases

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dc.contributor.authorBoudry, Walter I.
dc.contributor.authorKallberg, Jarl G.
dc.contributor.authorLiu, Crocker H.
dc.date.accessioned2020-09-12T21:02:43Z
dc.date.available2020-09-12T21:02:43Z
dc.date.issued2013-01-01
dc.description.abstractPrevious studies of share repurchase have primarily focused on examining announcement effects and long-term operating performance in order to distinguish among the diverse possible hypotheses for repurchase. One of the most important rationales they have studied is the over-investment hypothesis: firms repurchase in order to avoid investing in negative net present value projects. While the recent empirical analyses have presented some indirect evidence in support of the over-investment hypothesis, this study examines this rationale for repurchase from a unique perspective, empirically showing that project returns have an important influence on the decision to repurchase shares. Our sample of firms consists of 125 real estate investment trusts (REITs) in order to utilize a time series of real estate capitalization rates (property ROAs) from market transactions on different property types. These cap rates proxy for a REIT’s project opportunity set. Using a both Logit and Tobit models that corrects for other possible buyback rationales, we show that during periods with relatively low cap rates, REITs are more likely to both repurchase shares and repurchase larger amounts of shares than when cap rates are high.
dc.description.legacydownloadsBoudry7_Investment_Opportunities_and_Share_Repurchases.pdf: 905 downloads, before Aug. 1, 2020.
dc.identifier.other6216947
dc.identifier.urihttps://hdl.handle.net/1813/71394
dc.language.isoen_US
dc.relation.doihttps://doi.org/10.1016/j.jcorpfin.2013.07.006
dc.rightsRequired Publisher Statement: © Elsevier. Final version published as: Boudry, W. I., Kallberg, J. G., & Liu, C. H. (2013). Investment opportunities and share repurchases. Journal of Corporate Finance, 23, 23-38. Reprinted with permission. All rights reserved.
dc.subjectinvestment
dc.subjectshare repurchases
dc.subjectover-investment
dc.subjectreal estate investment trusts (REITs)
dc.titleInvestment Opportunities and Share Repurchases
dc.typearticle
local.authorAffiliationBoudry, Walter I.: wb242@cornell.edu Cornell University
local.authorAffiliationKallberg, Jarl G.: Thunderbird - The Garvin School of International Management
local.authorAffiliationLiu, Crocker H.: chl62@cornell.edu Cornell University

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