Title: Investment Opportunity Set, Undervalue, and Stock Repurchase in Public Companies on the IDX

Authors: Arif Kurniawan

Item Type : Thesis (Thesis)

Affiliations: Master of Management Science Study Program, Faculty of Economics and Business, Universitas Airlangga , Surabaya, Indonesia

Publisher: Universitas Airlangga

Abstract

Stock repurchase, or share buyback, is an action taken by issuers or public companies to repurchase shares that have been offered to the public, either through the stock exchange or outside the stock exchange. There are many motives behind this corporate action, one of which is a lack of investment opportunities and the company's shares are undervalued. The results of this study aim to determine the influence of Investment Opportunity Set (IOS) and undervaluation on stock repurchase decisions by companies. The data used are 35 non-financial companies that conduct stock repurchases and 35 non-financial companies that pay dividends listed on the Indonesia Stock Exchange (IDX) in the period 2008-2013. Logistic statistical tests were conducted on the Investment Opportunity Set (IOS) and Market to Book Ratio (MTBR) variables as proxies for each company's undervaluation. The results of the logistic statistical test indicate that Investment Opportunity Set (IOS) has a negative and significant effect on the likelihood of companies conducting stock repurchases, so it can be said that companies conduct stock repurchases when they lack investment opportunities. Meanwhile, undervalue has a negative and significant influence on the possibility of a company carrying out stock repurchases, so it can be said that a company carries out stock repurchases when the company's shares are undervalued.

Keywords: Stock repurchase, dividend, Investment Opportunity Set (IOS), Undervalue

Sources: http://repository.unair.ac.id/33619/