Share Repurchases and CEO Ownership

Ingmar Nyman () and Devra Golbe ()
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Ingmar Nyman: Hunter College

No 448, Economics Working Paper Archive at Hunter College from Hunter College Department of Economics

Abstract: When a firm repurchases shares, does the equity stake of its CEO change? To answer this question, we study a sample of 1200 publicly-traded US firms between 2006 and 2014. Because of the distribution of CEO ownership, we employ a multinomial logit model. We address the potential endogeneity of share repurchases in the model with a control-function approach. The analysis suggests that CEOs tend not to change their equity holdings in a share repurchase, but that the decrease in shares outstanding increases the fraction of the firm that they own. This, in turn, is likely to influence the firm’s decision-making and efficiency. Market undervaluation does not appear to induce the CEO to buy shares herself, but there is evidence that it does induce the firm to repurchase more shares.

Keywords: Share repurchases; Inside ownership; corporate governance; informed trading (search for similar items in EconPapers)
JEL-codes: G30 G32 G35 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-bec and nep-cfn
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:htr:hcecon:448

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