The effect of monetary policy on corporate share repurchases in the United States

Abstract

In the wake of the global financial crisis that began in 2007, central banks throughout the world engaged in unprecented amounts of monetary policy aimed at stimulating their respective economies. One frequent comment from financial operators during this period is that the effectiveness of these efforts was reduced by the fact that central banks policies were also encouraging firms to borrow in order to repurchase their own shares rather than investing. In this paper, we put the hypothesis that loose monetary encourages share repurchases to the test by analyzing the response of S&P500 firms to perceived changes in Federal Reserve Bank policies. We find significant evidence supporting this hypothesis, and find some evidence supporting the hypothesis that firms may be borrowing in order to finance these repurchases.

Com a conseqüència de la crisi financera mundial que va començar el 2007, els bancs centrals de tot el món van emprendre una quantitat important de política monetària per estimular les seves respectives economies. Un comentari freqüent dels operadors financers durant aquest període és que l'efectivitat d'aquests esforços es va veure reduït pel fet que les polítiques dels bancs centrals també estaven encoratjant a les empreses a demanar prestat per recomprar les seves pròpies accions en comptes d'invertir. En aquest article, vam posar la hipòtesi que els guanyadors monetaris solen compartir les recompenses a la prova analitzant la resposta de les empreses S&P500 a canvis percebuts en les polítiques del Banc Federal de la Reserva. Trobem proves significatives que donen suport a aquesta hipòtesi, i troben evidències que donen suport a la hipòtesi que les empreses poden prestar per finançar aquestes recompenses.