Journal of Financial and Quantitative Analysis Vol. 50 No. 3 2015
Bonus-Driven Repurchases
open access
Abstract
Using a large hand-collected database of chief executive officer (CEO) bonus structures, we find that when a CEO’s bonus is directly tied to earnings per share (EPS), his company is more likely to conduct a buyback. This effect is especially pronounced when a company’s EPS is right below the threshold for a bonus award. Share repurchasing increases the probability the CEO receives a bonus and the magnitude of that bonus, but only when bonus pay is EPS based. Bonus-driven repurchasing firms do not exhibit positive long-run abnormal returns.
- DOI
- 10.1017/s0022109015000149
- Volume
- 50
- Issue
- 3
- Pages
- 447-475
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref