This paper empirically investigates which events affect stock pricing through equity repurchases, the announcement of board meetings, the approval by general meetings of stockholders, or the incident of actual purchases, thereby clarifying the motivation behind equity repurchases. In particular, it attempts to exploit differences in legal procedures in Japanese corporate financing. The estimation results demonstrate that the repurchase based on the 1994 amendment to the Commercial Law is more consistent with the free cash-flow hypothesis, while the repurchase made under the special code enforced in 1997 is more agreeable with the signaling hypothesis. No evidence is found for liquidity impacts of repurchases on stock pricing.
