A Game Plan for Share Repurchases

Stonham, Paul

doi:10.1016/s0263-2373(01)00112-8

Cited by 15 publications

(10 citation statements)

References 5 publications

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Section: The Role Of Large Shareholdersmentioning

confidence: 95%

“…In the case of a payout, they prefer share repurchases to dividends, because share repurchases give them more discretion about the timing of the payout. Furthermore, in some cases a share repurchase may increase the executives’ ownership concentration (Stonham, ). Therefore, we conjecture that:H In the presence of high levels of executive ownership concentration (CEOs, executives), payout is lower and, in the case of a payout, share repurchases are preferred over dividends.…”

Section: Literature and Hypothesesmentioning

confidence: 99%

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Executive Remuneration and the Payout Decision

Geiler¹,

Renneboog²

2015

Corporate Governance

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Manuscript Type: EmpiricalResearch Question/Issue: This paper investigates whether corporate payout policies (dividends, share repurchases, a combination of dividends and share repurchases, and full earnings retention) are set by CEOs who intend to maximize their personal wealth. Research Findings/Insights: For all listed UK companies we study whether the payout channel choice is affected by investor sentiment, taxation, major shareholder ownership, and in particular the CEO's compensation package. The payout choice has an immediate effect on the value of the CEO's stock options and restricted stock, as anticipated dividends drive down the value of his equity-based pay (if it is not dividend-protected), and share repurchases have a positive impact on pay. By means of a quantile regression approach and nested logit models, we find that CEOs adopt a payout policy that increases the value of their equity-based pay. Theoretical/Academic Implications: Traditional research shows that corporate payout policies cater to shareholder clienteles who have preferences for specific types of payout induced by e.g. differences in taxation on dividends and capital gains, or market sentiment. We demonstrate that it is a CEO's personal wealth as reflected by his compensation package rather than shareholder preferences that has the strongest impact on the payout policy. Practitioner/Policy Implications: This research encourages firms/remuneration consultants to make top management's remuneration packages 'dividend-neutral', in other words to remove the negative impact of the dividends on pay such that the payout and payout channel choice will not be influenced by the CEO's wealth. In addition, this research encourages shareholders to contemplate whether the payout is beneficial for them and to vote on the proposed payout policy at the annual general meetings.

show abstract

Section: The Role Of Large Shareholdersmentioning

confidence: 95%

Section: Literature and Hypothesesmentioning

confidence: 99%

Executive Remuneration and the Payout Decision

Geiler¹,

Renneboog²

2015

Corporate Governance

View full text Add to dashboard Cite

show abstract

“…In case of a payout, they prefer share repurchases to dividends, because share repurchases give them more discretion about the timing of the payout. Furthermore, in some cases a share repurchase may increase the executives' ownership concentration (Stonham, 2002).…”

Section: The Role Of Large Shareholdersmentioning

confidence: 99%

Executive Remuneration and the Payout Decision

Geiler

Renneboog

2014

SSRN Journal

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Manuscript Type Empirical Research Question/Issue This paper investigates whether corporate payout policies (dividends, share repurchases, a combination of dividends and share repurchases, and full earnings retention) are set by CEOs who intend to maximize their personal wealth. Research Findings/Insights For all listed UK companies we study whether the payout channel choice is affected by investor sentiment, taxation, major shareholder ownership, and in particular the CEO's compensation package. The payout choice has an immediate effect on the value of the CEO's stock options and restricted stock, as anticipated dividends drive down the value of his equity‐based pay (if it is not dividend‐protected), and share repurchases have a positive impact on pay. By means of a quantile regression approach and nested logit models, we find that CEOs adopt a payout policy that increases the value of their equity‐based pay. Theoretical/Academic Implications Traditional research shows that corporate payout policies cater to shareholder clienteles who have preferences for specific types of payout induced by e.g. differences in taxation on dividends and capital gains, or market sentiment. We demonstrate that it is a CEO's personal wealth as reflected by his compensation package rather than shareholder preferences that has the strongest impact on the payout policy. Practitioner/Policy Implications This research encourages firms/remuneration consultants to make top management's remuneration packages ‘dividend‐neutral’, in other words to remove the negative impact of the dividends on pay such that the payout and payout channel choice will not be influenced by the CEO's wealth. In addition, this research encourages shareholders to contemplate whether the payout is beneficial for them and to vote on the proposed payout policy at the annual general meetings.

show abstract

“…As we shall see in our literature review, to date, there has not been much research on the role of share repurchases in curbing the market downturn under uncertain conditions brought by COVID-19. But, we are of the view that the signaling power of share repurchases should not be ignored since they may serve as a credible tool for managers in conveying to investors that the true value of their firm is higher than its current market value (Hackethal & Zdantchouk, 2006 ), particularly in turbulent times (Stonham, 2002 ) such as the global financial crisis of 2008–2009 (Chen et al, 2018 ). In this regard, it is worth exploring why firms may have preferred to buy their shares back instead of holding cash for precautionary purposes.…”

Section: Introductionmentioning

confidence: 99%

Pan(dem)ic reactions in Turkish stock market: evidence from share repurchases

Pirgaip

2021

Eurasian Econ Rev

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A Game Plan for Share Repurchases

Cited by 15 publications

References 5 publications

Executive Remuneration and the Payout Decision

Executive Remuneration and the Payout Decision

Executive Remuneration and the Payout Decision

Pan(dem)ic reactions in Turkish stock market: evidence from share repurchases

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