Download this Paper Open PDF in Browser

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

41 Pages Posted: 27 Jun 2001  

Kathleen M. Kahle

University of Arizona - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: June 11, 2001

Abstract

This paper examines how stock options have affected the decision to repurchase shares, the amount repurchased, and the market reaction to the repurchase announcement. I find that firms announce repurchases when executives have large numbers of options outstanding and when employees have large numbers of options currently exercisable. Once the decision to repurchase is made, the amount repurchased is positively related to total options exercisable by all employees, but independent of managerial options. These results are consistent with managers repurchasing both to maximize their own wealth and to fund employee stock option exercises. The market appears to recognize this motive, however, and reacts less positively to repurchases announced by firms with high levels of non-managerial options outstanding.

Keywords: share repurchase, executive stock options, employee stock options

JEL Classification: G30, G32

Suggested Citation

Kahle, Kathleen M., When a Buyback Isn't a Buyback: Open Market Repurchases and Employee Options (June 11, 2001). Available at SSRN: https://ssrn.com/abstract=273041 or http://dx.doi.org/10.2139/ssrn.273041

Kathleen M. Kahle (Contact Author)

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-7489 (Phone)

Paper statistics

Downloads
1,366
Rank
10,656
Abstract Views
4,818