Market Timing, EPS and the Choice Between Repurchases and Special Dividends

42 Pages Posted: 13 Mar 2023 Last revised: 6 Feb 2024

See all articles by Seth Armitage

Seth Armitage

University of Edinburgh - Accounting and Finance

Ronan Gallagher

University of Edinburgh - Edinburgh Business School

Pia Helbing

The University of Edinburgh

Date Written: November 30, 2023

Abstract

We estimate gains from market timing of daily open-market repurchases (OMRs) and the notional equivalent for special dividends. We compare the importance of timing opportunities with incentives to manage earnings per share (EPS), in the choice between OMRs and special dividends. Pay-related OMRs, to provide shares for re-issue to staff, are distinguished from payout-related OMRs to distribute cash. Both types display timing ability. Companies tend to pay out via repurchasing when timing opportunities are compelling, and will opt for a special dividend otherwise. Incentives to manage EPS do not explain the choice of repurchase versus special dividend.

Keywords: Share repurchases, special dividends, market timing, EPS, share-based pay

JEL Classification: G35

Suggested Citation

Armitage, Seth and Gallagher, Ronan and Helbing, Pia, Market Timing, EPS and the Choice Between Repurchases and Special Dividends (November 30, 2023). Available at SSRN: https://ssrn.com/abstract=4382931 or http://dx.doi.org/10.2139/ssrn.4382931

Seth Armitage

University of Edinburgh - Accounting and Finance ( email )

29 Buccleuch Place
Edinburgh, EH8 9JS
United Kingdom
44 131 650 3794 (Phone)

Ronan Gallagher (Contact Author)

University of Edinburgh - Edinburgh Business School ( email )

29 Buccleuch Pl
Edinburgh, Scotland EH8 9JS
United Kingdom

Pia Helbing

The University of Edinburgh ( email )

Old College
South Bridge
Edinburgh, Scotland EH8 9JY
United Kingdom

HOME PAGE: http://https://www.business-school.ed.ac.uk/staff/pia-helbing

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