We estimate the cross-sectional relationship between open market
repurchases and accounting data for a large sample of dividend-
paying and non-dividend paying firms over a twelve year period
(1984-95). Consistent with the hypothesis that firms use open
market repurchases to reduce the agency costs of free cash flow, we
find that repurchases are positively related to proxies for free
cash flow and negatively related to proxies for marginal financing
costs. We also examine the extent to which management stock options
influence the choice between open market repurchases and dividend
payments. Because the value of management stock options--like any
call option--is negatively related to expected future dividend
payments, management can increase the value of its stock options by
substituting share repurchases for dividend growth. We find
evidence that such substitution occurs: for dividend-paying firms,
share repurchases are positively related and dividend increases are
negatively related to a proxy for management stock options, whereas
for non-dividend-paying firms, the relationship between repurchases
and options is weak and statistically insignificant.
General
Imprint: |
Bibliogov
|
Country of origin: |
United States |
Release date: |
February 2013 |
First published: |
February 2013 |
Authors: |
George W. Fenn
|
Dimensions: |
246 x 189 x 2mm (L x W x T) |
Format: |
Paperback - Trade
|
Pages: |
32 |
ISBN-13: |
978-1-288-72143-6 |
Categories: |
Books >
Social sciences >
Politics & government >
General
|
LSN: |
1-288-72143-9 |
Barcode: |
9781288721436 |
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