Journal of Financial Services Research

, Volume 43, Issue 2, pp 221–242

Motivation for Repurchases: A Life Cycle Explanation


    • College of ManagementYuan Ze University
  • Konan Chan
    • School of Economics and FinanceUniversity of Hong Kong
    • Department of FinanceNational Chengchi University
  • Wei-Hsien Lai
    • College of ManagementYuan Ze University
  • Yanzhi Wang
    • College of ManagementYuan Ze University

DOI: 10.1007/s10693-011-0126-7

Cite this article as:
Liang, W., Chan, K., Lai, W. et al. J Financ Serv Res (2013) 43: 221. doi:10.1007/s10693-011-0126-7


This study examines the motives for share repurchases. Whereas most prior research points to either the signaling or free cash flow hypothesis, we find that the motives for repurchases differ depending on the firm’s life cycle stage. Specifically, we find that a firm in the growth stage tends to announce a repurchase program to signal its undervalued stock whereas a firm in the mature stage is prone to buy back shares to dispense excess free cash flow. We also find that the market reaction to repurchase announcements corroborates this life-cycle argument.


RepurchaseLife cycleSignalingFree cash flow

JEL Classification


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© Springer Science+Business Media, LLC 2012