Does Corporate Governance Matter in Decision Making of Stock Repurchases?

Abstract

This research highlights the stock repurchase motivation in Indonesia and the influence of corporate governance on stock repurchase decision making. Each country has different motivations to repurchase stocks, in which there are six stock repurchase hypotheses. This research also examined the interaction influence of both mechanisms. The market was observed in 6-7 years after melting down the events in 2008-2009. The stock repurchase data were manually collected from the corporate events issued by the companies. The test was conducted based on two corporate governance mechanisms (internal and external mechanisms) which have different tendencies in the corporate governance supervision system. Based on the analysis results, the stock repurchases in Indonesia was motivated to maintain the sustainability of shareholders’ authority, especially due to the fluctuating economic conditions signaling the market valuation.