Article
Effect Of Share Repurchase Programs on Shareholder Wealth: A Systematic Literature Review
Stock buybacks, or share repurchase programs, are a corporate financial tool that has been an increasingly significant and influential financial approach to maximising shareholder wealth and capital allocation. The trend in firms in both developed and emerging economies over the last few decades has been that the companies have favoured repurchases to the traditional dividend payouts because it is more flexible, more effective in terms of taxes, and may lead to better earnings per share (EPS) and market value. The paper provides a systematic literature review of how share repurchase programs impact on shareholder wealth by providing a synthesis of key theoretical and empirical work published between 2000 and 2026. The PRISMA framework is used to ensure that the relevant studies are selected in a structured and transparent manner in the leading databases like Scopus, Web of Science, Google Scholar and the ScienceDirect. The results show that buyback announcements tend to have a positive short-term abnormal return which are indicative of positive investor responses and reflective of the effects. But the long-term evidence of shareholder wealth creation is still mixed and varies on the basis of undervaluation, financial position, quality of governance, market environment and the objective of repurchases. Another important effect of buybacks as indicated in the review is the enhancement of EPS, the optimisation of capital structure, reduction of agency cost, and the replacement of dividends. Besides, periods of crisis, like the Global Financial Crisis and the COVID-19 pandemic, made substantial impacts on the behaviour of repurchase. Generally, the research finds that share buyback programs can boost stockholder wealth provided they are adopted in a strategic manner and in combination with good corporate fundamentals. The paper has contributed to the literature by defining research gaps and providing future direction of the researchers, investors, managers and policymakers.