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Management compensation contracts and distribution policies in the US technology sector

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  • Grey, Colette
  • Flynn, Antoinette
  • Donnelly, Ray

Abstract

This paper examines the impact of executive compensation practices on (a) the decision to distribute and (b) the distribution channel employed by companies from the US technology sector. We report that firms that compensate their managers using executive stock options (ESOs) tend to distribute less and firms that use stock awards make more distributions. When we simultaneously examine the distribution and the channel used, we find firms using ESOs restrict their dividend payments but their propensity for stock repurchases is unaffected. Firms using stock awards to compensate managers make greater distributions across all channels. We also provide strong evidence in favour of the agency and leverage explanations for distributions.

Suggested Citation

  • Grey, Colette & Flynn, Antoinette & Donnelly, Ray, 2020. "Management compensation contracts and distribution policies in the US technology sector," International Review of Financial Analysis, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:finana:v:67:y:2020:i:c:s1057521919303734
    DOI: 10.1016/j.irfa.2019.101403
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    1. Trinh, Vu Quang & Seetaram, Neelu, 2022. "Top-management compensation and survival likelihood: the case of tourism and leisure firms in the US," Annals of Tourism Research, Elsevier, vol. 92(C).
    2. Douglas A. Adu & Antoinette Flynn & Colette Grey, 2022. "Executive compensation and sustainable business practices: The moderating role of sustainability‐based compensation," Business Strategy and the Environment, Wiley Blackwell, vol. 31(3), pages 698-736, March.
    3. Kalyani Mulchandani & Ketan Mulchandani & Sahil Singh Jasrotia, 2021. "Does gender diversity on firm’s board affect dividend payouts? Evidence from India," Future Business Journal, Springer, vol. 7(1), pages 1-11, December.
    4. Grey, Colette & Flynn, Antoinette & Adu, Douglas A., 2024. "An examination of how executive remuneration and firm performance are influenced by Chair-CEO diversity attributes," International Review of Financial Analysis, Elsevier, vol. 94(C).

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    More about this item

    Keywords

    Dividend; Share Repurchase; Executive Remuneration; Free Cash Flow; Signalling; Corporate Governance;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • 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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