We examine the link between firms’ stock repurchase activity and the presence of earnings per share (EPS) performance conditions in executive compensation contracts. Findings reveal a strong positive association between repurchases and EPS-contingent compensation arrangements. Further analysis suggests net benefits to shareholders from this association. Specifically, repurchasers experience larger increases in total payouts; the positive association between repurchases and cash performance is more pronounced for firms with EPS targets in the presence of surplus cash; undervalued firms with EPS targets are more likely to signal mispricing through a repurchase; and repurchasers with EPS conditions are associated with lower abnormal accruals. We find no evidence that EPS-driven repurchases impose costs on shareholders in the form of investment myopia.

In capital-intensive industries, firms face complicated multi-staged financing, investment, and production decisions under the watchful eye of existing and potential industry rivals. In various representations of this environment, we show that a first-mover advantage in debt weakly dominates a first-mover advantage in capacity. Without a first-mover advantage in debt, the incumbent may suffer a dead-weight loss. When both the entrant and incumbent deploy debt prior to capacity, a first-mover in capacity benefits from softer competition. With a long-purse debt cost, leading in debt still remains advantageous.

We exploit the 1996 telecommunications deregulation as a quasi-natural experiment to investigate whether incumbents alter debt and capacity tactics when facing new rivals. We find that incumbents increase leverage after deregulation, even when controlling for traditional determinants and market conditions. Consistent with a new post-deregulation benefit, a higher leverage is positively related to market shares. This behavior appears only in telecommunication segments most affected by the deregulation. We find weak evidence for increased use of capacity tactics. Our findings for incumbents facing an influx of rivals in a rapidly expanding market differ from those of earlier studies considering mature markets.