Corporate share buybacks: impact on equity incentive pay and shareholder value

Table of content:
1. Introduction 2. Equity compensation and stock buybacks background 3. Theoretical framework on incentives-induced buybacks 4. Literature review 5. Research design 6. Explaining the net effects of stock buyback programmes on the equity incentive plans for risk-averse employees 7. Explaining the effects of incentive-induced buybacks on stock performance 8. Explaining the effects of incentive-induced buybacks on the subsequent firm performance 9. Conclusion

[https://www.routledge.com/Corporate-Share-Buybacks-Impact-on-Equity-Incentive-Pay-and-Shareholder-Value/Ndayisaba-DahirAhmed/p/book/9781032131146?srsltid=AfmBOoqxAoJloqHbSnVKadEG5beyoOzYoAxWrsVgfQjSZ1Xx7dQOOZel]

This book integrates elements from agency theory and signalling theory and draws upon recent changes in the Australian payout policy and incentives pay for risk-averse employees to provide theoretical and empirical analyses that explain the paradox of the popularity of on-market stock buyback activities in a market environment characterised by reasonably high share prices.

The authors utilise a dynamic model that rationalises this paradox, which is divided into three components. The first component predicts that executives may be conducting on-market stock buyback programmes (SBPs) to adjust equity-based remuneration for risk-averse employees, thereby motivating their performance without granting them additional costly equity incentive plans (EIPs); the second component predicts that companies are likely to invest in SBPs to increase the ownership stakes of employees in the firm, thereby inducing risk-averse employees to increase their productivity which increases firm value; while the third component predicts that shareholders would benefit from incentives-induced buybacks if a firm’s opportunity cost of funds spent on buybacks is less than its inverse price-to-earnings ratio.

The authors’ findings highlight differences in the market responses towards announced repurchase motives, implying that not all incentives-induced buybacks are value-destructive buybacks. Specifically, the widespread assumption that SBPs stifle investments in human and capital stock may be subjective as the findings show that incentives-induced buybacks may be value-creative or value-destructive depending on share repurchase motives of SBPs.

This book will be a useful guide for scholars and researchers of finance, corporate finance, financial economics and financial accounting.

(https://www.routledge.com/Corporate-Share-Buybacks-Impact-on-Equity-Incentive-Pay-and-Shareholder-Value/Ndayisaba-DahirAhmed/p/book/9781032131146?srsltid=AfmBOoqxAoJloqHbSnVKadEG5beyoOzYoAxWrsVgfQjSZ1Xx7dQOOZel)