The Role of Executive Stock Options in REIT Repurchases
25 Pages Posted: 7 Jul 2006
There are 2 versions of this paper
The Role of Executive Stock Options in REIT Repurchases
The Role of Executive Stock Options in REIT Repurchases
Date Written: June 7, 2006
Abstract
In this paper, we examine the relationship between managerial stock option holdings and the decision to announce a repurchase of the firm's common stock. Managerial stock option holdings should reinforce the traditional undervaluation, free cash flow and capital structure motives for repurchases. We use data from the REIT industry during the peak period of repurchase activity (1997-1999) to estimate a logit model of the decision to repurchase. After controlling for the standard motivations discussed in the literature, we find evidence that managerial option holdings are positively related to the likelihood of a repurchase announcement. Our results also support the contention that REITs use repurchase announcements to signal undervaluation.
Keywords: REITs, Stock Repurchases, Executive Stock Options
JEL Classification: J33, G34, G32, G35, G14
Suggested Citation: Suggested Citation
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