Share Repurchases Under Economic Policy Uncertainty: Evidence from China

This study examines the impact of economic policy uncertainty (EPU) on open market share repurchases, addressing a gap in the literature regarding its signaling role in immature markets. Using quarterly data from Chinese listed firms between 2017 and 2022, our analysis reveals that higher EPU significantly increases both the likelihood and scale of repurchases, driven by heightened information asymmetry and stock price pressure, particularly for privately owned, high-tech, and R&D-intensive firms. EPU also extends repurchase program duration and enhances both announcement and long-term returns. Given the irreversibility of firms' prior investments, EPU exacerbates mispricing risk. Our findings highlight the signaling role of share repurchases in immature markets, in contrast to precautionary motives in developed markets. These findings provide new insights into managing economic policy uncertainty and offer implications for navigating uncertainty through open market share repurchases in immature capital markets. •Economic policy uncertainty (EPU) can either increase or reduce share repurchases.•The research finds that greater EPU increases share repurchases.•The increasing information asymmetry and stock price pressure are key drivers.•The signaling value of share repurchases is higher during high EPU periods.•The findings suggest share repurchases are an effective tool to manage EPU risks.