Strategic Satisficing? A Behavioral-Agency Perspective on Stock Repurchase Program Announcements

Academy of Management Journal, Vol. 46, pp. 160-179, 2003

Posted: 11 Jan 2002 Last revised: 14 Dec 2008

See all articles by Wm. Gerard Sanders

Wm. Gerard Sanders

Jones Graduate School of Management, Rice University

Mason A. Carpenter

University of Wisconsin-Madison (Deceased)

Abstract

Executives confront potentially conflicting pressures - to maximize shareholder wealth in the long term and to appease shareholders in the near term. Because near-term pressures must be addressed to preserve tenure and to realize the potential benefits of long-term strategies, executives are increasingly likely to rely on shareholder mollification initiatives. We develop a behavioral-agency theoretical framework to study how stock repurchase programs are used to help top managers appease shareholders. Analysis of 250 large U.S. firms suggests that stock repurchase programs are variously a function of information asymmetry, risky stock-based incentives, and performance expectations.

Keywords: governance, uncertainty, information assymetry, top managers, executive compensation, stock options

JEL Classification: G3, M1

Suggested Citation

Sanders, Wm. Gerard and Carpenter, Mason A., Strategic Satisficing? A Behavioral-Agency Perspective on Stock Repurchase Program Announcements. Academy of Management Journal, Vol. 46, pp. 160-179, 2003, Available at SSRN: https://ssrn.com/abstract=1303625 or http://dx.doi.org/10.2139/ssrn.296257

Wm. Gerard Sanders

Jones Graduate School of Management, Rice University ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Mason A. Carpenter (Contact Author)

University of Wisconsin-Madison (Deceased)

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