In Search of Stock Repurchases Determinants in Listed Indonesian Firms during Regulatory Changes

47 Pages Posted: 29 Jun 2020

See all articles by Abdul Moin

Abdul Moin

Universitas Islam Indonesia, Faculty of Economics, Students

Yilmaz Guney

Coventry University

Izidin El Kalak

Cardiff Business School

Date Written: June 3, 2020

Abstract

Motivated by the introduction of share repurchases regulations in 1998 and 2007 coupled with unique characteristics of the Indonesian market, we investigate the effect of firms’ sub-optimal financial position on their share repurchases decisions. Then, we study the effect of these determinants through an exogenous shock, the 2007 regulatory change. We show that sub-optimal financial positions play a role in the corporate share repurchases decisions. Further, we find that the enactment of the regulations has a significant effect on firms’ undertaking share repurchases programs. Unlike the common perception and findings in the literature, we observe that the underpricing of shares has a weak effect on the Indonesian firms’ decisions to repurchase their stocks. Our results hold using several estimation methods that account for potential endogeneity issues.

Keywords: Share repurchases; regulations; dividends; sub-optimal decisions; underpricing; Indonesia

JEL Classification: G32, G35

Suggested Citation

Moin, Abdul and Guney, Yilmaz and El Kalak, Izidin, In Search of Stock Repurchases Determinants in Listed Indonesian Firms during Regulatory Changes (June 3, 2020). Journal of Economic Behavior and Organization, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3618623

Abdul Moin

Universitas Islam Indonesia, Faculty of Economics, Students ( email )

Jl. Pawiro Kuat
Condong Catur, Depok
Sleman, Daerah Istimewa Yogyakarta 55283
Indonesia

Yilmaz Guney (Contact Author)

Coventry University ( email )

Coventry, CV1 5FB
United Kingdom

Izidin El Kalak

Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

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