Equity-based compensation and the timing of share repurchases: the role of the corporate calendar
Tinbergen Institute Discussion Paper 21-101/IV
83 Pages Posted: 5 May 2022 Last revised: 22 Oct 2024
There are 2 versions of this paper
Equity-based compensation and the timing of share repurchases: the role of the corporate calendar
Date Written: April 12, 2022
Abstract
We examine whether CEOs use share repurchases to sell their equity at inflated prices. We document that share repurchases, just like equity-based compensation, are affected by the corporate calendar—the firm’s schedule of earnings announcements and insider trading restrictions. The corporate calendar can fully explain why share repurchases and equity-based compensation coincide. The alignment with the corporate calendar is stricter in firms with strong internal governance or high external monitoring. When CEOs sell equity, firms are actually less likely to repurchase. Our findings reconcile earlier studies and highlight the importance of the corporate calendar for the timing of share repurchases.
Keywords: Payout policy, share repurchases, quarterly earnings announcement, equity-based compensation, insider trading, fiscal calendar
JEL Classification: G14, G35, M12, M41, M52
Suggested Citation: Suggested Citation