The impact of share repurchases on bank operating performance after the global financial crisis: A comparison between the U.S. and Europe

This paper conducts a comparative analysis of the impact of actual share repurchases executed by U.S. and European banking firms between 2008 and 2020 on their subsequent operating performance, as measured by ROE and ROA. The empirical results indicate a significantly positive effect of share repurchases on the operating performance of both U.S. and European banks in the year following these transactions. This evidence is consistent with both the information signaling and free cash flow hypotheses, though it exhibits a slightly stronger inclination towards supporting the latter. This suggests that, in a mature industry like banking where organic growth opportunities are limited, stock repurchases serve as an effective strategy for returning excess cash to shareholders, not only enhancing shareholder value but also mitigating the risk of agency conflicts.