Management compensation contracts and distribution policies in the US technology sector

Colette Grey, Antoinette Flynn and Ray Donnelly

International Review of Financial Analysis, 2020, vol. 67, issue C

Abstract: This paper examines the impact of executive compensation practices on (a) the decision to distribute and (b) the distribution channel employed by companies from the US technology sector. We report that firms that compensate their managers using executive stock options (ESOs) tend to distribute less and firms that use stock awards make more distributions. When we simultaneously examine the distribution and the channel used, we find firms using ESOs restrict their dividend payments but their propensity for stock repurchases is unaffected. Firms using stock awards to compensate managers make greater distributions across all channels. We also provide strong evidence in favour of the agency and leverage explanations for distributions.

Keywords: Dividend; Share Repurchase; Executive Remuneration; Free Cash Flow; Signalling; Corporate Governance (search for similar items in EconPapers)
JEL-codes: G34 G35 M41 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:67:y:2020:i:c:s1057521919303734

DOI: 10.1016/j.irfa.2019.101403

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