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Strategic repurchases and equity sales: Evidence from equity vesting schedules

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  • Moore, David

Abstract

This paper studies the strategic use and timing of share repurchases by insiders for personal gain. Using grant-level compensation data and a hand-collected sample of monthly repurchases, I find a positive causal relation between executive equity sales and share repurchases. I identify the relation using the vesting schedule of equity grants as an instrument for equity sales. This behavior is persistent across firm, executive, and governance characteristics. Both CFO and CEO vesting schedules impact repurchases, suggesting the CFO may also have influence over the execution of the repurchase program. There is minimal evidence of long-term value destruction. The results indicate executive contracts impact the execution of share repurchase programs.

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  • Moore, David, 2023. "Strategic repurchases and equity sales: Evidence from equity vesting schedules," Journal of Banking & Finance, Elsevier, vol. 146(C).
    • Handle: RePEc:eee:jbfina:v:146:y:2023:i:c:s0378426622002977
    DOI: 10.1016/j.jbankfin.2022.106717
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    Cited by:

    1. Nicholas Guest & S. P. Kothari & Parth Venkat, 2023. "Share repurchases on trial: Large‐sample evidence on share price performance, executive compensation, and corporate investment," Financial Management, Financial Management Association International, vol. 52(1), pages 19-40, March.
    2. Gow-Cheng Huang & Kartono Liano & Ming-Shiun Pan, 2023. "Open-market stock repurchases, insider trading, and price informativeness," Review of Quantitative Finance and Accounting, Springer, vol. 60(4), pages 1495-1513, May.

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    More about this item

    Keywords

    Share repurchase; Share buyback; Payout policy; Option and stock grants; Equity vesting; Equity compensation CEO incentives and myopia;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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