An empirical investigation into motivations for and determinants of share repurchases activity : the case of Saudi Arabia

Abstract EN

This study aims to identify the motivations and determinants for share repurchase practices in Saudi Arabia.

The data, were collected through a questionnaire survey, covering two groups-financial managers and academic staff, and the 122 responses received were analysed using the Mann-Whitney Test.

The findings reveal that the five main incentives for repurchases, in Saudi Arabia, are “to improve the companys earnings per share", “to increase share price”, “to signal managements confidence in the future level of earnings and share prices”, “to remove a specific shareholder”, and “to reduce the administrative cost of small shareholdings by removing minority shareholders”.

Additionally, four potential determinants are proposed as follows : “good corporate governance”, “company size”, ”ownership structure”, and ’’managements experience”.

This paper is probably the first to study share repurchase activity in Saudi Arabia.

Thus, it adds new evidence from a developing country to the growing literature, thereby contributing to the knowledge of the practice of share repurchases.

Previous findings have interesting implications which could be helpful to investors, management, regulators and legislators in their attempts to comprehend the incidence of share repurchase practices and resolve agency problems.

The specific economic and cultural conditions in Saudi Arabia may restrict the generalisability of this study.