Share Repurchases and Pay-Performance Sensitivity of Employee Compensation Contracts

• 成果类型: Article
• 署名作者: Babenko, Ilona
• 署名单位: Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2008.01430.x
• 发表日期: 2009
• 页码: 117-150
• 关键词: STOCK OPTION PLANS; free cash flow; capital structure; corporate-ownership; information-content; tender offers; equity prices; AGENCY COSTS; MARKET; incentives

摘要

I show that share repurchases increase pay-performance sensitivity of employee compensation and lead to greater employee effort and higher stock prices. Consistent with the model, I find that after repurchases, employees and managers receive fewer stock option and equity grants, and that the market reacts favorably to repurchase announcements when employees have many unvested stock options. Managers are more likely to initiate share repurchases when employees hold a large stake in the firm. Moreover, since employees are forced to bear more risk in firms that repurchase shares, they exercise their stock options earlier and receive higher compensation.