Managerial discretion in authorising open market share repurchases: empirical evidence from the Italian context

Abstract

This paper contributes to existing literature on open market share repurchases in Italy by studying authorisations that the board of directors needs to obtain from the shareholders' general meeting in order to acquire company's own shares. In such a context, I investigate whether the buyback purpose that managers disclose in their report affects number of shares to be repurchased. Particularly, since managers could potentially benefit from share repurchase programmes carried out in the presence of stock option plans, I explore whether this motivation influences the number of shares they require to include in the buyback programme. In pursuit of my objectives, I analyse reports managers provide shareholders' meeting to obtain the authorisation to acquire company's own shares over a 6-year period (2004-2009) in Italian listed companies. Main results suggest that the buyback motivation affects number of shares managers intend repurchasing, highlighting the role of the quality of the board of directors in this issue.