Buyback Behaviour and the Anti-Dilution of Dilutive Stock Options
Sonika, R; Shackleton, M
Date: 2016
Publisher
FMA
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Abstract
We study how dilutive board-level stock options impact anti-dilutive daily
buybacks in the UK. We show that buyback behaviour and stock option holdings
positively influence cumulative post-buyback returns. Buybacks, however, have
anti-dilutive implications and are thus linked to the level and nature of dilutive
stock options ...
We study how dilutive board-level stock options impact anti-dilutive daily
buybacks in the UK. We show that buyback behaviour and stock option holdings
positively influence cumulative post-buyback returns. Buybacks, however, have
anti-dilutive implications and are thus linked to the level and nature of dilutive
stock options outstanding. We find increases in aggregate stock options to escalate
buyback implementation. This is driven largely by unvested stock options that
significantly enhance anti-dilutive benefits. Robustness tests using “overconfident”
board classification and treasury share regulation confirm the anti-dilutive motive
behind buybacks when stock options are unvested.
Finance and Accounting
Faculty of Environment, Science and Economy
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