Are stock repurchases more flexible than dividends? The caseof Japanese firms

Abstract

This article investigates the flexibility hypothesis of stock repurchases relative to dividends using the panel data of 577 Japanese firms. The estimation result of the partial adjustment model shows that the coefficient of adjustment speed towards the target payouts is higher for total payouts defined as the sum of dividends and stock repurchases (62.4%) than dividends only (34.3%). This result suggests that stock repurchases are more flexible than dividends in Japan.