Volume 30, Number 1, 2008
The Role of Executive Stock Options in REIT Repurchases
Chinmoy Ghosh
University of Connecticut
Storrs, CT 06269-1041
Email: Chinmoy.ghosh@business.uconn.edu |
John P. Harding
University of Connecticut
Storrs, CT 06269-1041
Email: John.harding@business.uconn.edu
|
Ozcan Sezer
University of Toledo
Toledo, OH 43606-3390
Email: ozcan.sezer@utoledo.edu |
C.F. Sirmans
University of Connecticut
Storrs, CT 06269-1041
Email: cf.sirmans@business.uconn.edu
|
Abstract:
This paper examines the
relationship between managerial stock option holdings and the decision
to announce a repurchase of the firm’s common stock. Managerial stock
option holdings should reinforce the traditional undervaluation, free
cash flow, and capital structure motives for repurchases by helping to
align the objectives of management and shareholders. Data from the
Real Estate Investment Trust (REIT) industry during the peak period of
repurchase activity (1997–1999) are used to estimate a logit model of
the decision to announce a repurchase program. After controlling for the
standard motivations discussed in the literature, the findings reveal
that managerial option holdings are positively related to the likelihood
of a repurchase announcement.
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