The determinants of aggressive share buybacks

An empirical examination of U.S. publicly traded restaurant firms

Bibliographic Data

ID21689461
AuthorsJaehee Gim (0000-0002-6821-5556, School of Hotel and Tourism Management, The Hong Kong Polytechnic University, Kowloon, Hong Kong, corresponding author), Soocheong Jang (0000-0001-8132-0388, School of Hospitality and Tourism Management, Purdue University, West Lafayette, IN, USA)
Year2024
Volume30
Issue1
Pages132-151
Publication date2024-02-01
Open AccessYes
TypeARTICLE
VenueTourism Economics (JOURNAL)
Journal identifiersISSN: 1354-8166 • E-ISSN: 2044-0375
PublisherSAGE Publications (PUBLISHER • US)
DOI10.1177/13548166221137956
OpenAlexW4308882993
LanguageEN
References cited61

It has become a common practice for restaurant firms to spend amounts exceeding their earnings on share buybacks by depleting their cash reserves or even by borrowing money. Given restaurant firms’ limited ability to generate internal cash and the high cost of debt financing, using these means to finance share buybacks could jeopardize restaurant firms’ long-term success. However, little is known about the factors influencing restaurant firms’ tendency toward this seemingly aggressive buyback behavior. This study revealed that the more restaurant firms’ earnings reduce, the greater their tendency is to conduct such aggressive share buybacks. This result could provide some evidence that managerial self-serving behavior plays a role in aggressive share buybacks in the restaurant industry. The study also demonstrated that the positive impact of reduced earnings on aggressive buybacks becomes stronger as a firm’s degree of franchising increases

Business · Cash · Debt · Earnings · Economics · Empirical evidence · Monetary economics · Auditing, Earnings Management, Governance · Corporate Finance and Governance · Franchising Strategies and Performance · Finance

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