Reasons for share repurchases: an empirical study of the Brazilian capital market in the period from 1995 to 2008

Authors

  • Sandro de Freitas Nascimento Faculdade Estácio de Sá
  • Fernando Caio Galdi Fundação Capixaba de Pesquisas em Contabilidade, Economia e Finanças
  • Silvania Neris Nossa Fundação Capixaba de Pesquisas em Contabilidade, Economia e Finanças

Keywords:

Share repurchase, Empirical study, Shares, Brazilian market, Dividends

Abstract

The objective of this work was to verify the determining reasons for Brazilian companies to repurchase shares in the period from 1995 to 2008. The explanatory variables used in the statistical tests were based on previous studies (DURAND, 1952; MECKLING, 1973; SPENCE, 1976). The data were obtained from the Economática database and the empirical tests consisted of multiple regression with pooled data, with the help of least squares and tobit methods. Pooled and tobit regressions were applied to verify the statistical robustness of the results. The study was based on the capital structure adjustment, agency, dividend substitution and signaling theories. The reasons for share repurchases tested were adjustment of the capital structure, reduction of available cash flow, substitution of dividend payments and firm undervaluation. The only statistically significant reason for share buybacks was reduction of available cash flow. In light of agency theory, this indicates that firms with available cash can repurchase their shares with the intention of minimizing the principal-agent conflict.

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Author Biographies

Sandro de Freitas Nascimento, Faculdade Estácio de Sá

Mestre em Administração pelo Departamento de Administração da Fundação Capixaba de Pesquisas em Contabilidade, Economia e Finanças - Fucape Business School

Professor do Departamento de Administração pela Faculdade Estácio de Sá

Fernando Caio Galdi, Fundação Capixaba de Pesquisas em Contabilidade, Economia e Finanças

Pós-Doutor em Contabilidade pela University of Arkansas

Professor do Departamento de Administração, Contabilidade e Economia da Fundação Capixaba de Pesquisas em Contabilidade, Economia e Finanças

Silvania Neris Nossa, Fundação Capixaba de Pesquisas em Contabilidade, Economia e Finanças

Mestre em Ciências Contábeis pelo Departamento de Ciências Contábeis da Fundação Capixaba de Pesquisas em Contabilidade, Economia e Finanças - Fucape Business School

Pesquisadora do Departamento de Ciências Contábeis da Fundação Capixaba de Pesquisas em Contabilidade, Economia e Finanças - Fucape Business School

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Additional Files

Published

2011-07-22

Issue

Vol. 12 No. 5 (2011)

Section

Strategic Finances

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