Investor heterogeneity, investor-management disagreement and share repurchases
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. T...
Saved in:
| Main Authors: | , |
|---|---|
| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
2013
|
| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/lkcsb_research/3292 https://ink.library.smu.edu.sg/context/lkcsb_research/article/4291/viewcontent/Sheng_InvestorHeterogeneity_av.pdf |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Institution: | Singapore Management University |
| Language: | English |
| Summary: | 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. |
|---|