Bonus-Driven Repurchases

Journal of Financial and Quantitative Analysis - Tập 50 Số 3 - Trang 447-475 - 2015
Yingmei Cheng1, Jarrad Harford2, Tianming Zhang3
1[email protected],College of Business,Florida State University,Tallahassee,FL 32306
2[email protected],Foster School of Business,University of Washington,Seattle,WA 98195.
3[email protected],College of Business,Florida State University,Tallahassee,FL 32306

Tóm tắt

AbstractUsing a large hand-collected database of chief executive officer (CEO) bonus structures, we find that when a CEO’s bonus is directly tied to earnings per share (EPS), his company is more likely to conduct a buyback. This effect is especially pronounced when a company’s EPS is right below the threshold for a bonus award. Share repurchasing increases the probability the CEO receives a bonus and the magnitude of that bonus, but only when bonus pay is EPS based. Bonus-driven repurchasing firms do not exhibit positive long-run abnormal returns.

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