Investor Heterogeneity, Investor-Management Disagreement and Share Repurchases
Review of Financial Studies
2013
This paper develops and tests a new theoretical explanation for stock repurchases. Investors may disagree with the manager about the firm's investment projects. A repurchase causes a change in the investor base as investors who are most likely to disagree with the manager tender their shares. Therefore, a firm is more likely to buy back shares when the level of investor-management agreement is lower, and agreement improves as a consequence. Moreover, dispersion of opinion among investors cannot explain repurchase activity once the stock price and investor-management agreement are controlled for. Overall, the evidence is consistent with firms strategically using repurchases to improve alignment between management and shareholders.
- DOI
- 10.1093/rfs/hht043
- Volume
- 26 (10)
- Pages
- 2453-2491
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref