Share Repurchases, Dividends, and Executive Options: Empirical Evidence from Finland

21 Pages Posted: 3 Mar 2002

See all articles by Eva Liljeblom

Eva Liljeblom

Swedish School of Economics and Business Administration

Daniel Pasternack

Hanken School of Economics; Eufex Ltd

Date Written: February 26, 2002

Abstract

This paper reports empirical results on the determinants of the authorization decision for share repurchases and dividends in Finland. We use a data set with precise data on share repurchases as well as characteristics for the option programs. Contrary to the U.S., we use a data set where 41% of the options are dividend protected, which allows us to seprate between the "option funding" and "substitution/managerial wealth" hypothesis for the choice of the distribution method. We find that tax effects in terms of higher foreign ownership is the main determinant for share repurchases in Finland. We also find evidence in support of both the signalling and agency cost hypotheses for cash distributions, especially in the case of share repurchases. Finally, we find a significant difference between companies with or without dividend protected options. When options are dividend protected, the relationship between dividend distributions and the scope of the options program turns to a significantly positive one instead of the negative one documented on U.S. data. This gives some support for the substitution/managerial wealth hypothesis as a determinant for the choice of the distribution method.

Keywords: Share repurchases, Executive options, Foreign owners

JEL Classification: G12, G32, G35

Suggested Citation

Liljeblom, Eva and Pasternack, Daniel, Share Repurchases, Dividends, and Executive Options: Empirical Evidence from Finland (February 26, 2002). EFA 2002 Berlin Meetings Discussion Paper. Available at SSRN: https://ssrn.com/abstract=302084 or http://dx.doi.org/10.2139/ssrn.302084

Eva Liljeblom (Contact Author)

Swedish School of Economics and Business Administration ( email )

P.O. Box 479
FI-00101 Helsinki, 00101
Finland
+358-9-431 33 291 (Phone)
+358-9-431 33 393 (Fax)

Daniel Pasternack

Hanken School of Economics ( email )

P.O. Box 479
FI-00101 Helsinki, 00101
Finland

Eufex Ltd ( email )

Keilaranta 19
Espoo, 02150
Finland

Register to save articles to
your library

Register

Paper statistics

Downloads
602
Abstract Views
2,420
rank
43,702
PlumX Metrics