Does Share Repurchase Legalization Really Harm Corporate Investments?

We examine the investment effects of stock-repurchase legalization on public firms, using staggered adoptions in 17 countries (1985-2010). Legalization raises investment by 8-10% of the sample mean. Our findings are consistent with the hypothesis that buyback legalization improves equity-capital access across public markets. The positive investment effects are driven entirely by younger, higher-growth, cash-constrained non-repurchasers; capital structures shift from debt toward equity; profitability and valuation improve; and effects are strongest where capital-access frictions are more severe and where post-legalization buyback volumes were highest. Taken together, the results imply that blanket restrictions on buybacks could inadvertently impede capital-market functioning.