Share Repurchase Policies and CEO Compensations: An Empirical Examination

Abstract

I examined how share repurchase activities are associated with complicated managerial compensation plans. The empirical evidence in this study suggests that managerial equity based compensation incentives to increase the amount of share repurchases at companies with potentially the most severe agency problems. That is to say, the amount of share repurchases is greater for those firms that are with longer listing history, higher executive power measured by CEO's tenure and the amount of cash compensation, and fewer investment opportunities. My results show that the complexity of managerial compensation contracts plays an important role in explaining the share repurchase decisions.