Managerial Self-Interest and Strategic Repurchases: Evidence from Equity Vesting Schedules

Moore, David J.

doi:10.2139/ssrn.3014462

Cited by 11 publications

(15 citation statements)

References 38 publications

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“…Our main contribution is to study the long-term consequences of short-term incentives, by identifying outcome variables (repurchases and M&A) whose longterm effects can be reasonably estimated. Moore [2020] confirms the link between vesting equity and repurchases using a small sample of large firms, but does not study returns beyond three months, M&A, or the concentration of equity sales after corporate events.…”

Section: Introductionmentioning

confidence: 84%

“…We calculate vesting equity using data from Equilar, which gathers grantby-grant information on executives' vested and unvested equity awards for the Russell 3000. This wide coverage compares favorably with ExecuComp, which covers the S&P 1500, and Incentive Lab (used in Moore [2020]), which covers only the S&P 500 and a portion of S&P 400. Our initial sample contains the entire 48,856 firm-CEO-years for which Equilar collects compensation data from January 2006 to May 2016.…”

Section: Measuring Short-term Incentivesmentioning

confidence: 99%

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The Long-Term Consequences of Short-Term Incentives

2018

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Section: Introductionmentioning

confidence: 84%

Section: Measuring Short-term Incentivesmentioning

confidence: 99%

The Long-Term Consequences of Short-Term Incentives

2018

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“…Share repurchases represent a potential mechanism to temporarily support stock prices at shareholders' expense. Consistent with managers using repurchases to prop up prices for personal gain, Edmans, Fang, and Huang (2018) and Moore (2018) show repurchases increase around chief executive officer (CEO) equity vesting dates. Another growing literature suggests managers use repurchases to meet earnings per share (EPS) thresholds linked to CEO bonuses and analysts' estimates and these types of repurchases are associated with declines in employment and investment (Cheng, Harford, and Zhang (2015), Almeida, Fos, and Kronlund (2016)).…”

Section: Introductionmentioning

confidence: 92%

Why Do Firms Disagree with Short Sellers? Managerial Myopia versus Private Information

Bargeron¹,

Bonaimé²

2019

J. Financ. Quant. Anal.

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Though short sellers on average succeed at identifying overvalued equity, firms often signal disagreement with short sellers by repurchasing stock when short interest increases. We investigate whether this disagreement reflects a myopic defense of inflated prices, or positive private information. These repurchases appear motivated by managers’ private information, not agency issues, even when managerial benefits to short-termism are enhanced or monitoring is weaker. Managers’ informational advantage relates to subsequent news, earnings, and risk, but is attenuated if activists target management or insiders sell. A trading strategy based on our findings earns 7.5% annually.

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“…We calculate vesting equity using data from Equilar, which gathers grant‐by‐grant information on executives’ vested and unvested equity awards for the Russell 3000. This wide coverage compares favorably with ExecuComp, which covers the S&P 1500, and Incentive Lab (used in Moore [2020]), which covers only the S&P 500 and a portion of S&P 400. Our initial sample contains the entire 48,856 firm‐CEO‐years for which Equilar collects compensation data from January 2006 to May 2016.…”

Section: Data and Variable Measurementmentioning

confidence: 99%

“…Our main contribution is to study the long‐term consequences of short‐term incentives, by identifying outcome variables (repurchases and M&A) whose long‐term effects can be reasonably estimated. Moore [2020] confirms the link between vesting equity and repurchases using a small sample of large firms, but does not study returns beyond three months, M&A, or the concentration of equity sales after corporate events.…”

Section: Introductionmentioning

confidence: 99%

The Long‐Term Consequences of Short‐Term Incentives

Edmans

Fang

Huang

2021

J of Accounting Research

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This paper studies the long‐term consequences of actions induced by vesting equity, a measure of short‐term incentives. Vesting equity is positively associated with the probability of a firm repurchasing shares, the amount of shares repurchased, and the probability of the firm announcing a merger and acquisition (M&A). However, it is also associated with more negative long‐term returns over two to three years following repurchases and four years following M&A, as well as future M&A goodwill impairment. These results are inconsistent with CEOs buying underpriced stock or companies to maximize long‐run shareholder value, but consistent with these actions being used to boost the short‐term stock price and thus equity sale proceeds. CEOs sell their own stock shortly after using company money to buy the firm's stock, also inconsistent with repurchases being motivated by undervaluation.

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Managerial Self-Interest and Strategic Repurchases: Evidence from Equity Vesting Schedules

Cited by 11 publications

References 38 publications

The Long-Term Consequences of Short-Term Incentives

The Long-Term Consequences of Short-Term Incentives

Why Do Firms Disagree with Short Sellers? Managerial Myopia versus Private Information

The Long‐Term Consequences of Short‐Term Incentives

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