Publication Type
Journal Article
Version
acceptedVersion
Publication Date
10-2013
Abstract
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.
Keywords
stock repurchase, corporate payout, agreement, investor heterogeneity
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Review of Financial Studies
Volume
26
Issue
10
First Page
2453
Last Page
2491
ISSN
0893-9454
Identifier
10.1093/rfs/hht043
Publisher
Oxford University Press
Citation
HUANG, Sheng and Thakor, Anjan V..
Investor heterogeneity, investor-management disagreement and share repurchases. (2013). Review of Financial Studies. 26, (10), 2453-2491.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/3292
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/10.1093/rfs/hht043