This study examines whether the CEO uses share repurchases to sell her equity grants at inflated stock prices, a concern regularly voiced in politics and media. We find that the timing of buyback programs and equity compensation, i.e., the granting, vesting, and selling of equity, is largely...

As corporate payouts to shareholders reach record high levels and garner the attention of policymakers, understanding their causes and consequences is more important than ever. This chapter surveys the academic literature on repurchases, with a particular emphasis on research undertaken in the...

Firms have trouble issuing new bonds during financial market meltdowns. However, an intriguing yet often overlooked fact is that many firms also engage in debt buybacks at the same time. In this paper, we build a dynamic model to study the incentives for equity holders to buy back the debt. The...

This study examines whether the CEO uses share repurchases to sell her equity grants at inflated stock prices, a concern regularly voiced in politics and media. We find that the timing of buyback programs and equity compensation, i.e., the granting, vesting, and selling of equity, is largely...

The paper aims to determine whether French companies respond to investor demand and preference in terms of share repurchases and dividend payments. The study is based on data from the Thomson Reuters Eikon database and focuses on French companies listed on the CAC All-Tradable index from 2000 to...

This study examines whether the CEO uses share repurchases to sell her equity grants at inflated stock prices, a concern regularly voiced in politics and media. We find that the timing of buyback programs and equity compensation, i.e., the granting, vesting, and selling of equity, is largely...

Why do listed firms herd to repurchase shares? Analyzing complete repurchase records from the Chinese stock market from 2005 to 2021, we discover that firms aiming to boost stock prices through repurchasing shares drive the tendency for peers to also make repurchasing announcements. The positive...

Share repurchases have come under criticism as they may be used for earnings management and take capital away from productive investment. However, share repurchases can also reduce the agency costs of free cash flow and offset the dilution of current shareholders. Whether firms engage in good or...

Share repurchases have come under criticism as they may be used for earnings management and take capital away from productive investment. However, share repurchases can also reduce the agency costs of free cash flow and offset the dilution of current shareholders. Whether firms engage in good or...

Buyback of shares was considered as a good beginning for introducing flexibility in the capital structure. In 1999, the Securities and Exchange Board of India issued guidelines on buyback of shares that are to be followed by the listed companies. Buybacks can be regarded as the late 20th century...

We investigate the role of financialization in the decline of investment for U.S. non-financial firms from 1992 - 2017. We show that the tendency to maximize shareholder value, fuelled by stock-based manager compensation, has led U.S. firms to divert resources from real investment to share...

This paper analyzes changes in firms' cash flows and discount rates around share repurchase announcements. Both cash flow and discount rate volatility decrease significantly after repurchase announcements. The decrease in volatility is smallest for firms that are likely to be underpriced and...

We use a new international setting to test and strengthen the identification of “target leverage hypothesis” in the payout policy literature. We conduct a quasi-natural experiment induced by staggered share repurchase legalization in 17 economies and analyze its influences on leverage...

Prior studies associate dividends with permanent earnings signals and stock repurchases with transitory earnings signals. In contrast, we provide empirical evidence that in recent decades, dividends and stock repurchases have converged to each other in terms of their signaling for future...

This paper aims to identify economic shocks in four developed countries that authorize different buyback programs. Previous research has revealed that there are few public debates about buyback activities and economic conditions. According to the free cash flow hypothesis, the total payout...

Firms avail themselves of external finance to manage obligations to pay dividends, along with other commitments. Indian firms, which have significant ownership concentration, present a unique opportunity for analyzing the influence of promoter holding on financed dividend payouts. This study...

We study the extent to which decisions to expand firm size are associated with increases in subsequent CEO compensation. Controlling for past stock performance, we find a positive correlation between CEO compensation and the CEO's past decisions to increase firm size. This correlation is...

This paper uses a novel method to assess the timing of corporate share repurchases by examiningabnormal returns after firms stop repurchasing shares. This method reveals several new findings.First, repurchasing firms only experience positive abnormal returns after they stop repurchasingshares....

The past two decades have witnessed a sharp surge in corporate equity payout. The annual net equity payout of non-financial public companies in the U.S. averaged $525 billion (in 2010 dollars) per year from 2004 to 2019, compared to only $141 billion during the prior 17-year period. Using...

This paper reconsiders the effects of dividend taxation. Particular attention is paid to the form of the "equity trap", that is, the extent to which cash paid to the shareholders must be taxed as dividends. Our analysis shows that Sinn's (1991) criticism of the well-known King and Fullerton...

The objective of this research is to study the influence of undervaluation, free cash flow, leverage and dispersion of ownerships toward company’s stock repurchase (An empirical study of Indonesia stock exchange public listed companies). Many researchers have shown that the Stock repurchase is...

The paper aims to identify the variables contributing to special payouts considering open market repurchase, tender offer repurchases, and special dividends. A multinomial logit model has been used to investigate the choice of payout out of 754 payout announcements made between 2004 and 2017 in...

Share repurchases have experienced growing popularity in recent years. The wealth transfer between shareholders associated with share repurchases has however been widely neglected in the literature, yet. Since managers are free to time repurchases so that ongoing shareholders profit at the...

This study utilizes quantile regressions to investigate the effect of the determinants of share repurchases on firms at different points of the share repurchases distribution. Empirical results from a large panel of NYSE repurchasing firms, document an asymmetric effect of several determinants...

This study adds to a growing literature on managerial reference points by examining whether prior repurchase prices are reference points for current repurchase decisions. We find that the percent change from the prior repurchase price to the current stock price is negatively related to the...

We show that mutual fund managers' trading experiences bias their future repurchasing decisions. Specifically, a fund is 17% more likely to repurchase a stock when it previously sold the stock for a gain rather than for a loss. Fund managers still prefer to repurchase stocks they sold for a gain...

Share repurchases have become persistent. Firms use cash flow as the primary source of capital to finance repeated share repurchases. This internal financing increases (decreases) retained earnings (paid-in-capital) in the capital structure and weakens the sensitivity of investment to cash flow....

A long-held view in the academy is that shareholders are "residual claimants" in the sense that shareholders are paid in full only after the corporation pays its creditors. The reality on the ground is far different. Corporations give assets away to their shareholders long before they have...

CEO trustworthiness is positively related to long-term excess returns after buyback announcements. When the CEO is trustworthy, statements that the stock is undervalued are more credible. CEO trustworthiness is initially measured by the extent to which people in the county where the company...

Irrevocable commitments (ICs) are undertakings by target-firm blockholders to accept an upcoming takeover bid before its announcement. Using a novel manually-collected dataset, we develop three new hypotheses and explore one existing hypothesis to explain the use of ICs: (1) trade-off between...

We use the staggered adoption of Wrongful Discharge Laws (WDLs) by U.S. state courts as a quasi-natural experiment to examine the causal impact of firing costs and employment protection on corporate payouts. We find that the greater employment protection imposed by WDLs leads to higher share...

I demonstrate that firms' repurchase frequency predicts repurchase motives and helps separate firms that repurchase for signaling from firms that repurchase to control dilution. Infrequent repurchasers follow a flexible buyback policy and respond to changes in earnings in a timelier manner....

This paper re-examines the impact of the EU Market Abuse Directive (MAD) on the market reaction around share repurchase announcements. We use a unique hand-collected dataset of firms listed on the Athens Stock Exchange, and we find evidence that contrasts with previous conclusions for large...

Share buybacks have become common practice across U.S corporations. This paper shows that firms finance these operations mostly through newly issued corporate bonds, and that the exogenous variation in the cost of debt – due to innovations in monetary policy – is key in explaining managers'...

This paper studies the strategic use and timing of share repurchases by insiders for personal gain. Using grant level compensation data and a hand-collected sample of monthly repurchases, I find a positive causal relation between CEO equity sales and share repurchases. I identify the relation...

We find that earnings announcements that follow equity issues and buyback announcements have predictable market reactions. Four-factor abnormal returns to earnings following buyback announcements are higher by 5.1% than similar returns to earnings following equity issues over the (-1,+30)...

This study examines management's response to the change in accounting for stock option-based compensation imposed by SFAS No. 123R, whose implementation is expected to reduce reported income. To cope with this impact, management may be motivated to decrease the use of stock options as part of...

This paper examines firms' voluntary disclosures regarding open market repurchase programs, i.e., announcements that firms have suspended, resumed, or completed repurchases. Abnormal returns around announcements are, on average, positive when firms voluntarily announce repurchase resumptions or...

Share repurchases are transactions which are supposed to cause a market reaction through a signaling approach. However looking only at cumulated abnormal returns (CARs) is insufficient and the results are sometimes contradictory. We introduce the concept of informativeness to assess if...