Open market share repurchase programs and corporate governance: Company performance

Payout policies based on share repurchase programs provide greater flexibility than do those based on cash dividends. We develop and test an empirical model in which strongly-governed companies outperform weakly-governed companies after announcing share repurchase programs. Our findings include posi...

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Main Authors: CATON, Gary, GOH, Jeremy, LEE, Yen Teik, LINN, Scott C.
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Language:English
Published: Institutional Knowledge at Singapore Management University 2015
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/5213
https://ink.library.smu.edu.sg/context/lkcsb_research/article/6212/viewcontent/SSRN_id2594977.pdf
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spelling sg-smu-ink.lkcsb_research-62122019-11-13T07:44:54Z Open market share repurchase programs and corporate governance: Company performance CATON, Gary GOH, Jeremy LEE, Yen Teik LINN, Scott C. Payout policies based on share repurchase programs provide greater flexibility than do those based on cash dividends. We develop and test an empirical model in which strongly-governed companies outperform weakly-governed companies after announcing share repurchase programs. Our findings include positive associations between strong governance and both post-announcement adjusted operating performance and abnormal stock returns. The results are robust to sample selection bias, different sample criteria, governance measurement, and various control variables. In addition, governance strength is associated with larger post-announcement changes in CEO incentive compensation and merger and acquisition activity, both of which we argue are consistent with strongly-governed companies using the financial flexibility derived from choosing share repurchases over cash dividends to drive better performance. Consistent with current literature on attenuation of former anomalies, the associations we find between governance and post-announcement performance tend to disappear in the latter half of our sample period. 2015-12-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/5213 info:doi/10.2139/ssrn.2594977 https://ink.library.smu.edu.sg/context/lkcsb_research/article/6212/viewcontent/SSRN_id2594977.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Corporate Payout Share Repurchases Corporate Governance Corporate Finance Finance and Financial Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Corporate Payout
Share Repurchases
Corporate Governance
Corporate Finance
Finance and Financial Management
spellingShingle Corporate Payout
Share Repurchases
Corporate Governance
Corporate Finance
Finance and Financial Management
CATON, Gary
GOH, Jeremy
LEE, Yen Teik
LINN, Scott C.
Open market share repurchase programs and corporate governance: Company performance
description Payout policies based on share repurchase programs provide greater flexibility than do those based on cash dividends. We develop and test an empirical model in which strongly-governed companies outperform weakly-governed companies after announcing share repurchase programs. Our findings include positive associations between strong governance and both post-announcement adjusted operating performance and abnormal stock returns. The results are robust to sample selection bias, different sample criteria, governance measurement, and various control variables. In addition, governance strength is associated with larger post-announcement changes in CEO incentive compensation and merger and acquisition activity, both of which we argue are consistent with strongly-governed companies using the financial flexibility derived from choosing share repurchases over cash dividends to drive better performance. Consistent with current literature on attenuation of former anomalies, the associations we find between governance and post-announcement performance tend to disappear in the latter half of our sample period.
format text
author CATON, Gary
GOH, Jeremy
LEE, Yen Teik
LINN, Scott C.
author_facet CATON, Gary
GOH, Jeremy
LEE, Yen Teik
LINN, Scott C.
author_sort CATON, Gary
title Open market share repurchase programs and corporate governance: Company performance
title_short Open market share repurchase programs and corporate governance: Company performance
title_full Open market share repurchase programs and corporate governance: Company performance
title_fullStr Open market share repurchase programs and corporate governance: Company performance
title_full_unstemmed Open market share repurchase programs and corporate governance: Company performance
title_sort open market share repurchase programs and corporate governance: company performance
publisher Institutional Knowledge at Singapore Management University
publishDate 2015
url https://ink.library.smu.edu.sg/lkcsb_research/5213
https://ink.library.smu.edu.sg/context/lkcsb_research/article/6212/viewcontent/SSRN_id2594977.pdf
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