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Share Repurchases and CEO Ownership

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Abstract

When a firm repurchases shares, does the equity stake of its CEO change? To answer this question, we study a sample of 1200 publicly-traded US firms between 2006 and 2014. Because of the distribution of CEO ownership, we employ a multinomial logit model. We address the potential endogeneity of share repurchases in the model with a control-function approach. The analysis suggests that CEOs tend not to change their equity holdings in a share repurchase, but that the decrease in shares outstanding increases the fraction of the firm that they own. This, in turn, is likely to influence the firm’s decision-making and efficiency. Market undervaluation does not appear to induce the CEO to buy shares herself, but there is evidence that it does induce the firm to repurchase more shares.

Suggested Citation

  • Ingmar Nyman & Devra L. Golbe, 2017. "Share Repurchases and CEO Ownership," Economics Working Paper Archive at Hunter College 448, Hunter College Department of Economics.
    • Handle: RePEc:htr:hcecon:448
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    File URL: http://econ.hunter.cuny.edu/wp-content/uploads/sites/6/RePEc/papers/HunterEconWP448.pdf
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    Cited by:

    1. Shushu Liao & Marco Errico, 2023. "Corporate investment and stock market valuation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 50(3-4), pages 795-819, March.

    More about this item

    Keywords

    Share repurchases; Inside ownership; corporate governance; informed trading;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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