Assessing the impact of market logic and long-term strategic plans of top management in share buyback decisions

Abstract

Purpose

This paper investigates stakeholders' perspectives of share buybacks in the context of time-horizons of investment decisions and strategy.

Design/methodology/approach

We use in-depth interviews with stakeholders from eight listed UK firms as well as examine their publicly available data.

Findings

Findings suggest that share buybacks involve a wide range of stakeholders' rational interests and long-term management perspectives as they enable firms to strategise operational plans towards their long-term corporate goals.

Research limitations/implications

The findings are based on interviews with a small number of share buyback firms and the findings, therefore, may not be generalised to all firms.

Practical implications

The results show that share buybacks may be part of the long-term interests of firms and not necessarily used as part of short-term EPS increases as suggested in the extant literature.

Originality/value

The findings contribute to the literature on corporate pay-out policies in the context of short-term financial objectives vs long-term strategic objectives of stakeholders. They show that share buybacks can be an important part of firms' long-term strategic considerations.

Citation

Demirag, I., Kungwal, T. and Bakkar, Y. (2022), "Assessing the impact of market logic and long-term strategic plans of top management in share buyback decisions", Managerial Finance, Vol. 48 No. 3, pp. 392-408. https://doi.org/10.1108/MF-07-2021-0336