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Executive Bonus Contract Characteristics and Share Repurchases

Sunyoung Kim

出版	SSRN, 2017
URL	http://books.google.com.hk/books?id=x27-zgEACAAJ&hl=&source=gbs_api

註釋

We examine the importance of bonus contract characteristics, specifically with respect to the relation between EPS-based bonuses and share repurchases. We find that managers are more (less) likely to repurchase shares and spend more (less) on repurchases when as-if EPS just misses (exceeds) the bonus threshold (maximum) EPS level. We find no such relation when as-if EPS is further below the threshold. We find weak evidence that managers of firms with as-if EPS just below the EPS target are more likely to repurchase shares and spend more on repurchases relative to firms with as-if EPS just above the EPS target. We further find that the incentive-zone slopes specified in the bonus contracts are positively associated with share repurchases. Managers making bonus-motivated repurchases do so at a higher cost. Together, our results highlight the importance of compensation design in motivating managers' behavior and aligning managers' incentives with shareholders.