ABSTRACT

We provide a structural explanation about how and when leveraged stock buyback improves firms’ profitability. We find operating profit on equity and operating profit sensitivity on debt are crucial factors to consider when determining the source of stock repurchase. Our theoretical reasoning and empirical tests show that companies with high operating profit on equity and low operating profit sensitivity on debt have a higher chance of improving profit through leveraged buyback. We also suggest a structural form to estimate leveraged buyback and cash buyback based on financial variables instead of companies’ disclosure.

中文翻译：

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杠杆式股票回购能提高公司的盈利能力吗？

摘要

我们提供了关于杠杆股票回购如何以及何时提高公司盈利能力的结构性解释。我们发现股权的营业利润和债务的营业利润敏感性是确定股票回购来源时需要考虑的关键因素。我们的理论推理和实证检验表明，股权营业利润高、债务营业利润敏感性低的公司通过杠杆回购提高利润的机会更高。我们还建议一种基于财务变量而不是公司披露来估计杠杆回购和现金回购的结构形式。