Does Stock Repurchase Enhance Price Stability? —A Study from the Perspective of Corporate Life Cycle

Abstract

In the backdrop of intensified capital market volatility, stock repurchases have gained significant attention as a crucial strategy for companies to stabilize their stock prices. However, the effectiveness of these repurchases may vary depending on the stage of the company’s lifecycle. This essay centers on the effects of stock repurchases on stock price stability, using Chinese A-share listed companies from 2010 to 2022 as the research sample. It delves into the heterogeneity of this impact from the perspective of the firm’s life cycle. A two-way fixed effects model is used in the investigation. Initially, the complete sample is subjected to a regression analysis to examine the overall relationship between stock repurchases and stock price stability. Subsequently, the sample is categorized into three groups: growth phase, mature phase, and decline phase, for separate testing. This approach aims to investigate the varying impacts of stock repurchases on stock price stability across different stages of the company’s lifecycle. The results show that stock repurchases can significantly enhance stock price stability, and this effect is most pronounced in the mature stage of the enterprise, while it is not significant in the growth and decline stages. In addition, factors such as enterprise size and asset-liability structure also have a systematic impact on stock price volatility. This study not only enriches the research results in the field of stock repurchases and provides a new perspective for understanding the market effects of repurchase behavior, but also offers a theoretical foundation and practical guidance for regulatory authorities to enhance the repurchase system and enterprises to formulate differentiated repurchase strategies.