Publication Type
Working Paper
Version
publishedVersion
Publication Date
12-2015
Abstract
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.
Keywords
Corporate Payout, Share Repurchases, Corporate Governance
Discipline
Corporate Finance | Finance and Financial Management
Research Areas
Finance
First Page
1
Last Page
53
Identifier
10.2139/ssrn.2594977
Citation
CATON, Gary; GOH, Jeremy; LEE, Yen Teik; and LINN, Scott C..
Open market share repurchase programs and corporate governance: Company performance. (2015). 1-53.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/5213
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.2594977