Management compensation contracts and distribution policies in the US technology sector

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Abstract

This paper examines the impact of executive compensation practices on (a) the decision to distribute and (b) the distribution channel employed by companies from the US technology sector. We report that firms that compensate their managers using executive stock options (ESOs) tend to distribute less and firms that use stock awards make more distributions. When we simultaneously examine the distribution and the channel used, we find firms using ESOs restrict their dividend payments but their propensity for stock repurchases is unaffected. Firms using stock awards to compensate managers make greater distributions across all channels. We also provide strong evidence in favour of the agency and leverage explanations for distributions.

Original languageEnglish
Article number101403
JournalInternational Review of Financial Analysis
Volume67
DOIs
Publication statusPublished - Jan 2020
Externally publishedYes

Keywords

  • Corporate Governance
  • Dividend
  • Executive Remuneration
  • Free Cash Flow
  • Share Repurchase
  • Signalling

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