When a Buyback Isn't a Buyback: Open Market Repurchases and Employee Options

Kahle, Kathleen M.

doi:10.2139/ssrn.273041

Cited by 219 publications

(349 citation statements)

References 17 publications

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“…The average stock repurchase amount was $108 billion for the period from 1995 to 1997 and $199 billion for the period from 1998 to 2000. Similar evidence is reported by Kahle (2002), who limits her analysis of stock repurchase programs to the 1990s. This evidence suggests that structural market change should be addressed when comparing stock repurchase programs from the late 1980s and mid 1990s to those from the late 1990s.…”

Section: The Datasupporting

confidence: 76%

“…It has traditionally been used by the stock repurchase literature as a measure of undervaluation. Similar to Dittmar (2000), we find no significant effect in our sample (Kahle (2002) finds marginal significance). The other variables used in earlier repurchase studies are statistically insignificant as well.…”

Section: Results For the Basic Regression Modelsupporting

confidence: 45%

“…Consequently, we develop an empirical model that includes future payoff, current stock price, systematic risk, and idiosyncratic risk. Other motives have been examined by Kahle (2002) and Dittmar (2000), these include employee stock options, free-cash flow, optimal leverage, and past undervaluation measured by average risk-adjusted return (alpha) or market-to-book ratio. Our primary hypothesis is: conveyed by the contemporaneous security price and other Bnon-informational'' stock repurchase determinants, post-announcement cumulative returns will be positively related to the proportion of shares sought for repurchase.…”

Section: Empirical Model and Hypotheses Testsmentioning

confidence: 99%

“…SharesSought i,t is the proportion of shares outstanding sought by REIT i at the announcement date, t. Similar repurchase size measures are used in earlier studies such as Dittmar (2000) and Kahle (2002). CumRet i;tþ( is company i_s cumulative dollar stock return per share from t to t+C.…”

Section: Empirical Model and Hypotheses Testsmentioning

confidence: 99%

“…Simply announcing a repurchase is unlikely to immediately resolve information asymmetry between managers and outsiders. And studies such as Dittmar (2000) and Kahle (2002) try to explain the size of repurchases looking backward by the degree of past undervaluation. We implicitly capture REIT managers_ inside information by the covariance between repurchase size and their firms_ returns well in the future.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

The Conditional Performance of REIT Stock Repurchases

Giambona

Golec

Giaccotto

2006

J Real Estate Finan Econ

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This paper uses a conditional performance measure to test whether real estate investment trust (REIT) managers announcing stock repurchases have private information about their firms' prospects. We use stock price to condition for public information and measure the managers' implied private information by the covariance between repurchase size and subsequent stock payoffs (or operating performance). Results show that managers have private information but mostly with respect to long-term as opposed to near-term payoffs. We also find that repurchase size is positively related to a stock's idiosyncratic return volatility, perhaps because noisy stocks deviate farther from fundamental value, offering informed managers larger profit potential. Copyright Springer Science + Business Media, Inc. 2006REITs, Conditional performance, Noisy rational expectations, Stock repurchases,

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Section: The Datasupporting

confidence: 76%

Section: Results For the Basic Regression Modelsupporting

confidence: 45%

Section: Empirical Model and Hypotheses Testsmentioning

confidence: 99%

Section: Empirical Model and Hypotheses Testsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

The Conditional Performance of REIT Stock Repurchases

Giambona

Golec

Giaccotto

2006

J Real Estate Finan Econ

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The Role of Share Repurchases for Firms’ Social and Environmental Sustainability

et al. 2022

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This article embarks on ethical trade-offs at the sustainability/finance interface by contrasting shareholders’ interest in short-term financial returns with society’s interest in counteracting ecological and social grievances. Scrutinizing share repurchases, we investigate a firm’s communicated sustainability orientation (i.e., its environmental and social value orientation) as well as its environmental and social sustainability performance. Our results are based on a large-scale panel dataset of 491 U.S. firms observed from 2004 to 2016. The dataset combines share buyback data with sustainability orientation scores from shareholder letters and sustainability performance ratings. The econometric models suggest no association between social value orientation and repurchase volumes, but a significantly negative relationship between environmental value orientation and buybacks in a cubic form. Executive stock options partially attenuate this relationship. Share repurchases in turn negatively affect future environmental and social performance. This study grasps the consequences of firms’ short-term shareholder satisfaction and discusses its ethical implications in the context of firms’ contribution to sustainable development, thereby providing important insights to the business ethics discourse.

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Executive stock-based compensation and firms’ cash payout: the role of shareholders’ tax-related payout preferences

Aboody

Kasznik

2008

Rev Acc Stud

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We hypothesize that the structure of executive stock-based compensation helps to align managers' payout choices with shareholders' tax-related payout preferences. Specifically, stock options, which are not dividend-protected, can deter selfinterested executives from using dividends as a form of payout. In contrast, restricted stock, which is dividend-protected, is more likely to induce the use of dividends. Relatedly, shareholders' preferences for dividends, which are taxed as ordinary income, can depend on the income tax consequences of dividends relative to those of long-term capital gains. To test our hypothesis, we investigate whether the exogenous changes in shareholders' tax-related payout preferences following the 2003 dividend tax rate reduction result in predictable shifts in executive stock-based compensation and in managers' payout choices. Consistent with our prediction, we find a positive relation between the increased use of dividends in firms' payouts and the increased (decreased) use of restricted stock (stock options) in executive compensation, particularly for firms with a greater percentage ownership by individual investors and with lower costs associated with modifying the structure of their compensation plans. Our investigation of the role of shareholders' tax-related payout preferences in the design of executive stock-based compensation extends the prior literature that has largely focused on the role of incentive contracts in inducing managerial effort, risk taking, and retention.

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When a Buyback Isn't a Buyback: Open Market Repurchases and Employee Options

Cited by 219 publications

References 17 publications

The Conditional Performance of REIT Stock Repurchases

The Conditional Performance of REIT Stock Repurchases

The Role of Share Repurchases for Firms’ Social and Environmental Sustainability

Executive stock-based compensation and firms’ cash payout: the role of shareholders’ tax-related payout preferences

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