Repurchases, Employee Stock Option Grants, and Hedging

Abstract

A large literature exists regarding stock repurchases by corporations. Recently, attention has focused on the link between employee stock options and repurchases. Business press and corporate disclosures often tie these two activities together. For example, in Microsoft’s 2003 10-K filing, footnote 14 to the financial statements states,1 We repurchase our common shares primarily to manage the dilutive effects of our stock option and stock purchase plans, and other issuances of common shares.