Equity-based compensation and the timing of share repurchases: The role of the corporate calendar

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 blackout periods. 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 shares. Our findings reconcile earlier studies and highlight the importance of the corporate calendar for the timing of share repurchases.

Keywords: Payout policy, share repurchases, earnings announcement, equity-based compensation, insider trading

JEL Classification: G14, G35, M12, M41, M52