In this paper, we analyze the effects of abnormal capital investment and financial flexibility on firm performance following actual share repurchases by using a unique Taiwanese dataset. The results indicate that superior operational performance is associated with share repurchases; however, share repurchases may crowd out required capital investments. Further examination reveals that firms with adequate financial flexibility outperform firms with inadequate financial flexibility after actual share repurchases. In summary, our findings suggest that financial flexibility can mitigate the investment crowding out effect and positively affect firms' operational performance post-repurchase.
