Open Access Journal Article

The business cycle’s influence on share repurchases of the UK

by Adhiraj Sodhi a,* orcid ,  Cesario Mateus b orcid ,  Irina Mateus b orcid  and  Aleksandar Stojanovic a orcid
a
Greenwich Business School, University of Greenwich, London, UK
b
Business School, Aalborg University, Aalborg, Denmark
*
Author to whom correspondence should be addressed.
JEA  2024, 65; 3(3), 65; https://doi.org/10.58567/jea03030003
Received: 14 August 2023 / Accepted: 7 September 2023 / Published Online: 15 September 2024
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Abstract

The UK fully legalised open market share repurchases in 1981, and to our knowledge no study has investigated the business cycle’s influence on repurchase decision-making. We address this aspect and investigate the period 1985-2014. This is relevant as the business cycle factors impact the firm-specific variables such as cash flow, profitability, dividends and capital structure, and these factors traditionally influence repurchase decisions. This forms the paper’s theoretical intuition, and the empirical objectives test the business cycle’s influence on the decision to undertake a repurchase, and also its influence on repurchases values. The results find that the business cycle influences both the decision of undertaking repurchases and repurchases’ values, and this influence has aggregately remained positively associated with economic prosperity. Thus, the frequency of repurchase announcements by British firms is more probable during prosperous economic circumstances. The results also reveal that the repurchase-business cycle relationship witnessed a structural break in 1996:Q2, and the real difference following this break is the increase in the business cycle’s influence on the decision regarding repurchase values. The paper thus contributes to existing literature by directly testing the UK’s repurchase-business cycle relationship, and providing detailed empirical evidences that business cycle conditions strongly impact the repurchase decision-making.

Keywords: Repurchases; macroeconomy; business cycle; frequency;
Copyright: © 2024 by Sodhi, Mateus, Mateus and Stojanovic. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
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ACS Style
Sodhi, A.; Mateus, C.; Mateus, I.; Stojanovic, A. The business cycle’s influence on share repurchases of the UK. Journal of Economic Analysis, 2024, 3, 65. https://doi.org/10.58567/jea03030003
AMA Style
Sodhi A, Mateus C, Mateus I, Stojanovic A. The business cycle’s influence on share repurchases of the UK. Journal of Economic Analysis; 2024, 3(3):65. https://doi.org/10.58567/jea03030003
Chicago/Turabian Style
Sodhi, Adhiraj; Mateus, Cesario; Mateus, Irina; Stojanovic, Aleksandar 2024. "The business cycle’s influence on share repurchases of the UK" Journal of Economic Analysis 3, no.3:65. https://doi.org/10.58567/jea03030003
APA style
Sodhi, A., Mateus, C., Mateus, I., & Stojanovic, A. (2024). The business cycle’s influence on share repurchases of the UK. Journal of Economic Analysis, 3(3), 65. https://doi.org/10.58567/jea03030003

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