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

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

Ingolf Dittmann, Amy Yazhu Li, Stefan Obernberger, Jiaqi Zheng

Series number :

Serial Number: 
909/2023

Date posted :

April 16 2023

Last revised :

April 16 2023
SSRN Share

Keywords

  • payout policy • 
  • share repurchases • 
  • equity-based incentives • 
  • short-termism

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 document that the corporate calendar—the firm's schedule of earnings announcements and blackout periods—induces a spurious positive correlation between share repurchases and equity-based compensation.

Accounting for the corporate calendar, share repurchases are no longer correlated with the granting or vesting of equity. The CEO is more likely to buy equity when the firm announces a buyback program and less likely to sell equity when the firm actually buys back shares. Equity-based compensation increases the CEO’s propensity to set up a buyback program when it benefits long-term shareholder value. Overall, our results suggest that equity-based compensation promotes the adoption of value-increasing buyback programs, but it does not affect the execution of these programs.

Authors

Real name:
Stefan Obernberger
Real name:
Amy Yazhu Li
Real name:
Jiaqi Zheng