The corporate calendar and the timing of share repurchases and equity compensation

Ingolf Dittmann, Amy Yazhu Li, Stefan Obernberger and Jiaqi Zheng
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Amy Yazhu Li: Erasmus University Rotterdam
Stefan Obernberger: Erasmus University Rotterdam
Jiaqi Zheng: University of Oxford

No 21-101/IV, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This study examines whether the CEO uses share repurchases to sell her equity grants at inflated stock prices, a concern regularly voiced in politics and media. We find that the timing of buyback programs and equity compensation, i.e., the granting, vesting, and selling of equity, is largely determined by the corporate calendar through blackout periods and earnings announcement dates. As a consequence, share repurchases and equity compensation are positively correlated. This correlation disappears once we account for the corporate calendar and should thus not be interpreted causally. Our results do not support the conclusion that CEOs systematically misuse share repurchases at the expense of shareholders. To the contrary, equity compensation increases the propensity to launch a buyback program when buying back shares is beneficial for long-term shareholder value.

Keywords: Payout policy; share repurchases; equity-based incentives; short-termism (search for similar items in EconPapers)
JEL-codes: G14 G35 M12 M52 (search for similar items in EconPapers)
Date: 2022-04-12
New Economics Papers: this item is included in nep-cfn
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