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The effects of executive compensation and outside monitoring on firms’ pre-repurchase disclosure behavior and post-repurchase performance

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  • Sheng-Syan Chen

    (National Chengchi University)

  • Robin K. Chou

    (National Chengchi University)

  • Yun-Chi Lee

    (Ming Chuan University)

Abstract

We show that corporate governance mechanisms play an important role in controlling managers’ opportunistic behavior. Low executive equity compensation and a high intensity of outside monitoring help to discourage undesirable self-interested disclosure decisions by management before share repurchases. Corporate governance mechanisms also have a significant impact on long-run abnormal stock prices and operating performance. Firms that manipulate pre-repurchase disclosures experience positive long-term abnormal stock returns. However, we do not find that these firms experience positive long-run operating performance. Corporate governance mechanisms significantly attenuate the tendency toward negative pre-repurchase disclosures and their effects on stock prices and operating performance.

Suggested Citation

  • Sheng-Syan Chen & Robin K. Chou & Yun-Chi Lee, 2020. "The effects of executive compensation and outside monitoring on firms’ pre-repurchase disclosure behavior and post-repurchase performance," Review of Quantitative Finance and Accounting, Springer, vol. 54(1), pages 111-158, January.
    • Handle: RePEc:kap:rqfnac:v:54:y:2020:i:1:d:10.1007_s11156-018-00785-1
    DOI: 10.1007/s11156-018-00785-1
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    More about this item

    Keywords

    Corporate governance; Repurchase; Voluntary disclosure; Long-term performance;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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