Abstract
Share buybacks reduce taxes, commit managers to pay out free cash-flow, and send positive signals to investors. This paper shows that they also transfer wealth from shareholders to the owners of employee stock options and that this transfer increases the price needed to induce shareholders to sell shares back to the firm. Two costs arise: at firms with poor governance, buybacks occur that harm shareholders; at firms with good governance, some value-enhancing buybacks do not occur. These costs are greatest when the number of outstanding options is large and when the options are out-of-the-money.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
