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Why Do Firms Repurchase Stock
Amy K. Dittmar
The Journal of Business
Vol. 73, No. 3 (July 2000), pp. 331-355
Published by: The University of Chicago Press
Stable URL: http://www.jstor.org/stable/10.1086/209646
Page Count: 26
In this article, I investigate the relation between stock repurchases and distribution, investment, capital structure, corporate control, and compensation policies over the 1977–96 period. I allow the significance of each motive to change over time to account for adjustments in the percentage of firms influenced by each motive. I find that, throughout the sample period, firms repurchase stock to take advantage of potential undervaluation and, in many periods, to distribute excess capital. However, firms also repurchase stock during certain periods to alter their leverage ratio, fend off takeovers, and counter the dilution effects of stock options.
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