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In this article, we empirically investigate the motivations for share repurchase decisions by a sample of 267 large UK listed companies covering the 4-year period 2001 to 2004. Though the UK constitutes the second largest market for share repurchases after the US, relatively little is known of the motivations of UK firms to repurchase their shares. Moreover, due to differences in the corporate governance and share repurchase regulations of the two countries, the extant US literature and evidence appear to be of relatively little relevance in explaining UK share repurchase decisions. Our results, using both two-way fixed effects regression models and multinominal Logit estimates, indicate that most repurchasing firms tend to be large and to already have high dividend payout ratios. Moreover, the most important determinant of share repurchase decisions appears to be corporate earnings, particularly expected earnings, which suggest that a degree of dividend substitution may lie behind many UK share repurchase decisions.
