The impact of the share buyback process on financial performance: An economic and accounting perspective. Evidence from Egypt

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This study aims to investigate the impact of the share buyback process and its motives on financial performance from an accounting and economic perspective. The study sample consisted of 66 firms listed on the Egyptian Stock Exchange from 2009 to 2020 and employed the OLS regression analysis. The results show a positive effect of share buybacks on financial performance, measured by the added economic value (EVA) and the return on equity (ROE). In contrast, the results show an insignificant effect of share buybacks on the return on assets (ROA). The study found that management’s motives to buy back shares affect a company’s financial performance. The study also found that management’s motive to achieve a cash surplus improves the company’s financial performance. The study also found that the company’s management motive to increase earnings per share is one of the most important motives for the company to buy back shares, which also improves the company’s financial performance. The study also showed that the economic value added (EVA) is one of the most important measures of financial performance, in which the repurchase of shares had the most significant impact in improving it over the return on assets or the return on equity. However, the study did not find evidence that the firms repurchase of shares out of increased financial leverage affects the financial performance. Moreover, the study found that increasing earnings per share is the most crucial motive for sharing buybacks in the Egyptian market.

Acknowledgments
I thank Jeddah International College for funding this research and continuous support from the Dean, Dr. Tariq Hamdi, and the general manager, Mr. Yazid Al Tunisi.
I thank Professor Dr. Mohamed Tahoun, Professor of Financial Accounting at Alexandria University, for reviewing this research before sending it to the journal.

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    • Figure 1. Research models
    • Table 1. Distribution of the sample
    • Table 2. Measurement of the variables
    • Table 3. Descriptive statistics
    • Table 4. Correlation matrix
    • Table 5. Financial performance predictability using share repurchase
    • Table 6. The interactive effect of cash flows and share buyback on financial performance
    • Table 7. The interactive effect of the average change in earnings per share and share buyback on financial performance
    • Table 8. The interactive effect of financial leverage per share and share buyback on financial performance
    • Table 9. The interactive effect for the aggregated share buyback motives and share buyback on financial performance
    • Table 10. Incremental explanatory ability for share repurchases motives on financial performance
    • Conceptualization
      Hossam Hassan Mahmoud Al Sharawi
    • Formal Analysis
      Hossam Hassan Mahmoud Al Sharawi
    • Funding acquisition
      Hossam Hassan Mahmoud Al Sharawi
    • Investigation
      Hossam Hassan Mahmoud Al Sharawi
    • Methodology
      Hossam Hassan Mahmoud Al Sharawi
    • Writing – original draft
      Hossam Hassan Mahmoud Al Sharawi
    • Writing – review & editing
      Hossam Hassan Mahmoud Al Sharawi