Share Repurchases and Stock Option Grants

39 Pages Posted: 27 Jan 2019 Last revised: 21 Feb 2019

See all articles by Ingolf Dittmann

Ingolf Dittmann

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute; Erasmus Research Institute of Management (ERIM); European Corporate Governance Institute (ECGI)

Thomas Keusch

INSEAD

Stefan Obernberger

Erasmus University Rotterdam - Erasmus School of Economics; Erasmus Research Institute of Management (ERIM)

Date Written: January 16, 2019

Abstract

This paper shows evidence for the hypothesis that the CEO opportunistically times share repurchases around her grants of at-the-money stock options. We find that firms decrease their repurchase activity in the quarter before the stock option grant to the CEO. When the option grant constitutes a larger fraction of the CEO's salary, firms more strongly change their repurchase activity. An alternative hypothesis is that CEOs time stock option grants rather than share repurchases. This hypothesis gives rise to the expectation that the effect is mostly present in unscheduled options. However, we find that the effect is present for both scheduled and unscheduled grants which is not consistent with this alternative hypothesis.

Keywords: Stock Options, CEO Compensation, Share Repurchases

JEL Classification: G32, G35

Suggested Citation

Dittmann, Ingolf and Keusch, Thomas and Obernberger, Stefan, Share Repurchases and Stock Option Grants (January 16, 2019). Available at SSRN: https://ssrn.com/abstract=3316793 or http://dx.doi.org/10.2139/ssrn.3316793

Ingolf Dittmann (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 10 4081283 (Phone)
+31 10 4089165 (Fax)

HOME PAGE: http://people.few.eur.nl/dittmann/

Tinbergen Institute

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Thomas Keusch

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Stefan Obernberger

Erasmus University Rotterdam - Erasmus School of Economics ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
115
Abstract Views
763
rank
260,305
PlumX Metrics