Share Repurchasing and the Policies of Stock-Options

Abstract

The objective of this paper is to examine the relation between share repurchases and stock options. In fact, certain studies demonstrate that the development of stock option plans since the beginning of the 1990s is also considered one explanation for the increase in equity programs for repurchasing shares. We have tested the validity of our hypothesis on a sample of 77 French firms listed during the 2003-2008 period. The results demonstrate a positive link between the performance of near future exercise of employee stock options and share repurchases. The desire to avoid the dilution associated with the performance of stock options can thus be one of the motives for making share repurchases. The results subsequently demonstrate that directors holding a substantial number of stock options encourage companies to make share repurchases. On the other hand, we detected a negative relationship between the existence of managerial stock options and the augmentation of dividends.