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Jurnal Ekonomi Malaysia

57 (1) 2023 181 – 192

Information Content of Share Buybacks from an Earnings Perspective

Faculty of Economics and Business
Universiti Malaysia Sarawak
94300 Kota Samarahan Sarawak, MALAYSIA.

cheelingchin26@gmail.com

Faculty of Economics and Business
Universiti Malaysia Sarawak
94300 Kota Samarahan Sarawak, MALAYSIA.

jmohamad@unimas.my

Faculty of Economics and Business
Universiti Malaysia Sarawak
94300 Kota Samarahan Sarawak, MALAYSIA.

ssalawati@unimas.my

School of Business and Management
University of Technology Sarawak
96000 Sibu, Sarawak, MALAYSIA.

chincheehua@uts.edu.my

Abstract

This study aims to examine the predictive ability of share buybacks from an earnings perspective. Panel data regression analysis is conducted to determine the impact of share repurchases on future firm performance using Malaysian publicly listed companies data over 2000-2020. This study is significant because of the importance of share buybacks to attract investors, especially during crisis periods. The results show that the share repurchase ratio is positively and significantly related to all the proxies for future firm performance, as represented by return on assets, return on equity, operating income, and funds from operations that are all measured in the following year of share buyback. The validity of the result is confirmed when tested with an alternative explanatory variable, while the sensitivity test shows that the signaling power of share repurchase is more apparent among share-repurchasing firms with small market capitalization. Overall, the findings support the information signaling hypothesis and suggest that share buybacks in Malaysia provide useful information about a company’s earnings prospects.

Keywords

information signaling hypothesis; Malaysia; payout policy; share repurchase; Signaling theory

JEL Codes

G32, G35
http://dx.doi.org/10.17576/JEM-2023-5701-13
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Bibliography

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Chin, C. -L., Jais, M., Sahari, S., & Chin, C. -H. (2023). Information Content of Share Buybacks from an Earnings Perspective. Jurnal Ekonomi Malaysia, 57(1), 181–192. http://dx.doi.org/10.17576/JEM-2023-5701-13

@article{chin2023information,
  title={Information Content of Share Buybacks from an Earnings Perspective},
  author={Chin, Chee-Ling and Jais, Mohamad and Sahari, Salawati and Chin, Chee-Hua},
  journal={Jurnal Ekonomi Malaysia},
  volume={57},
  number={1},
  pages={181—192},
 

year={2023},
}

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