Is Buying Back of Shares a Dangerous Financial Strategy?

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afzal ahmad
afzal ahmad
2
Md. Musharof Hossain
Md. Musharof Hossain

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GJMBR Volume 15 Issue B7

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The motives for the share repurchase is the increase in the value per share, and enhance the priceearnings (P/E) multiples, replenishment of the pool of share available for employee incentive options, prevention of hostile takeovers, and an effective way to return surplus cash to shareholders. Share repurchase programs can convince the capital structure of the company in a more direct way. Buy back stock reduces the market capitalization of a particular company, which makes the company able to strengthen capital gearing ratio as per its preference. The study found that if a company uses buying back of shares as a financial strategy, it will lead to increase in its capital gearing when financing is made for stock repurchase in the form of debt.

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No external funding was declared for this work.

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The authors declare no conflict of interest.

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afzal ahmad. 2015. \u201cIs Buying Back of Shares a Dangerous Financial Strategy?\u201d. Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 15 (GJMBR Volume 15 Issue B7): .

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Issue Cover
GJMBR Volume 15 Issue B7
Pg. 33- 35
Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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GJMBR-B Classification: JEL Code: N20
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v1.2

Issue date

September 21, 2015

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English

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The motives for the share repurchase is the increase in the value per share, and enhance the priceearnings (P/E) multiples, replenishment of the pool of share available for employee incentive options, prevention of hostile takeovers, and an effective way to return surplus cash to shareholders. Share repurchase programs can convince the capital structure of the company in a more direct way. Buy back stock reduces the market capitalization of a particular company, which makes the company able to strengthen capital gearing ratio as per its preference. The study found that if a company uses buying back of shares as a financial strategy, it will lead to increase in its capital gearing when financing is made for stock repurchase in the form of debt.

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Is Buying Back of Shares a Dangerous Financial Strategy?

Md. Musharof Hossain
Md. Musharof Hossain
Afzal Ahmad
Afzal Ahmad

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