Do Companies Alter their Stock Repurchase Strategies in Response to the COVID-19 Pandemic

• In Event: Operational Environment & Financial Decisions

Abstract

The 2020 COVID-19 pandemic has caused a substantial decline in public companies’ earnings. In contrast, these companies are required to focus more on the safety, health, and wellbeing of their employees, customers, and suppliers, which will eventually add to more reduction in earnings and returns for investors. We examine whether firms’ decisions on stock repurchases are influenced by the COVID-19 pandemic crisis. Using a sample of 3,806 firms from the years 2019 and 2020, we find that firms; (1) are overall less likely to repurchase shares after COVID-19; (2) are less likely to repurchase shares after the COVID-19 pandemic if they focus on sustainability and employee safety; (3) are more likely to repurchase shares after COVID-19 if they are undervalued; and (4) are less likely to repurchase shares after the pandemic if they have strong corporate governance and financial constraints. Results are robust and present policy, practice, and research implications.

Authors

• Joanna Golden, University of Memphis

• Zabihollah Rezaee, University of Memphis

• Kenneth Zheng, University of Wyoming