Debt-financed repurchases and credit ratings with the respect of free cash flow and repurchase purpose
Journal
North American Journal of Economics and Finance
Journal Volume
47
Pages
23-36
Date Issued
2019
Author(s)
Abstract
We find that the fraction of debt used to finance share repurchases is negatively associated with credit ratings. In particular, this association is more pronounced for firms with a high level of free cash flow. We further divide the sample by the repurchase purpose. We find that the associations between debt-financed repurchases, free cash flow, and credit ratings hold when the repurchase is made for the purpose of transferring shares to employees or for the purpose of equity conversion of convertible securities, but not when it is made for maintaining the company's credit. © 2018
Subjects
Credit ratings; Debt-financed repurchases; Free cash flow
SDGs
Type
journal article