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Impact of Share Buyback on Earnings Per Share (EPS) - An Empirical Study on Malaysian Listed Companies

Received: 11 January 2022     Accepted: 4 February 2022     Published: 16 February 2022
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Abstract

The notion of intention of share buyback by companies has been an increasingly popular subject of study by researchers in Malaysia and the developed economies. In particular, the impact of share buybacks on boosting the Earnings per Share (EPS) of companies has gained much attention. It is recognized that the influence of board decisions in carrying out share buybacks by concentrated ownership companies has a direct impact on the increase of EPS. To establish the actual effects of increase in EPS due to share buybacks, this study adopted Margaret Horan’s model of segmentation of EPS to determine the actual increase of EPS from companies’ operations. This study focuses on companies buying back more than 5% of shares, as the basis of analysis. The findings do not support any evidence that share buybacks contribute to an increase of EPS of companies. Adopting Margaret’s model criteria of at least RM 0.01 increase in EPS as effective increase, only 40% of companies from a sample of 15 companies had recorded actual increase in EPS. The findings may not be conclusive due to its relatively small sample size but it does provide an indication that the increase in EPS may not be solely due to effects of share buybacks. Perhaps future studies are encouraged to adopt another method of segmentation of EPS with larger sample size in determining share buyback’s actual impact on companies’ EPS.

Published in International Journal of Business and Economics Research (Volume 11, Issue 1)
DOI 10.11648/j.ijber.20221101.14
Page(s) 23-31
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2022. Published by Science Publishing Group

Keywords

Share Buybacks, Earnings Per Share (EPS), Segmentation, Treasury Shares, Frequency, Behavior, Efficient Market Hypothesis (EMH)

References
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Cite This Article
  • APA Style

    Wee Pat Pang. (2022). Impact of Share Buyback on Earnings Per Share (EPS) - An Empirical Study on Malaysian Listed Companies. International Journal of Business and Economics Research, 11(1), 23-31. https://doi.org/10.11648/j.ijber.20221101.14

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    ACS Style

    Wee Pat Pang. Impact of Share Buyback on Earnings Per Share (EPS) - An Empirical Study on Malaysian Listed Companies. Int. J. Bus. Econ. Res. 2022, 11(1), 23-31. doi: 10.11648/j.ijber.20221101.14

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    AMA Style

    Wee Pat Pang. Impact of Share Buyback on Earnings Per Share (EPS) - An Empirical Study on Malaysian Listed Companies. Int J Bus Econ Res. 2022;11(1):23-31. doi: 10.11648/j.ijber.20221101.14

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  • @article{10.11648/j.ijber.20221101.14,
      author = {Wee Pat Pang},
      title = {Impact of Share Buyback on Earnings Per Share (EPS) - An Empirical Study on Malaysian Listed Companies},
      journal = {International Journal of Business and Economics Research},
      volume = {11},
      number = {1},
      pages = {23-31},
      doi = {10.11648/j.ijber.20221101.14},
      url = {https://doi.org/10.11648/j.ijber.20221101.14},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20221101.14},
      abstract = {The notion of intention of share buyback by companies has been an increasingly popular subject of study by researchers in Malaysia and the developed economies. In particular, the impact of share buybacks on boosting the Earnings per Share (EPS) of companies has gained much attention. It is recognized that the influence of board decisions in carrying out share buybacks by concentrated ownership companies has a direct impact on the increase of EPS. To establish the actual effects of increase in EPS due to share buybacks, this study adopted Margaret Horan’s model of segmentation of EPS to determine the actual increase of EPS from companies’ operations. This study focuses on companies buying back more than 5% of shares, as the basis of analysis. The findings do not support any evidence that share buybacks contribute to an increase of EPS of companies. Adopting Margaret’s model criteria of at least RM 0.01 increase in EPS as effective increase, only 40% of companies from a sample of 15 companies had recorded actual increase in EPS. The findings may not be conclusive due to its relatively small sample size but it does provide an indication that the increase in EPS may not be solely due to effects of share buybacks. Perhaps future studies are encouraged to adopt another method of segmentation of EPS with larger sample size in determining share buyback’s actual impact on companies’ EPS.},
     year = {2022}
    }
    

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    T1  - Impact of Share Buyback on Earnings Per Share (EPS) - An Empirical Study on Malaysian Listed Companies
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    Y1  - 2022/02/16
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    DO  - 10.11648/j.ijber.20221101.14
    T2  - International Journal of Business and Economics Research
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    JO  - International Journal of Business and Economics Research
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    AB  - The notion of intention of share buyback by companies has been an increasingly popular subject of study by researchers in Malaysia and the developed economies. In particular, the impact of share buybacks on boosting the Earnings per Share (EPS) of companies has gained much attention. It is recognized that the influence of board decisions in carrying out share buybacks by concentrated ownership companies has a direct impact on the increase of EPS. To establish the actual effects of increase in EPS due to share buybacks, this study adopted Margaret Horan’s model of segmentation of EPS to determine the actual increase of EPS from companies’ operations. This study focuses on companies buying back more than 5% of shares, as the basis of analysis. The findings do not support any evidence that share buybacks contribute to an increase of EPS of companies. Adopting Margaret’s model criteria of at least RM 0.01 increase in EPS as effective increase, only 40% of companies from a sample of 15 companies had recorded actual increase in EPS. The findings may not be conclusive due to its relatively small sample size but it does provide an indication that the increase in EPS may not be solely due to effects of share buybacks. Perhaps future studies are encouraged to adopt another method of segmentation of EPS with larger sample size in determining share buyback’s actual impact on companies’ EPS.
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Author Information
  • Faculty of Business, International University of Malaya and Wales, Kuala Lumpur, Malaysia

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