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

Abstract

Executives confront potentially conflicting pressures—maximizing shareholder wealth in the long term and appeasing shareholders in the near term. Because they must address near-term pressures to preserve tenure and to realize the benefits of long-term strategies, executives are increasingly likely to seek to mollify shareholders. We develop a behavioral-agency theoretical framework for studying how stock repurchase programs are used to help top managers appease shareholders. Analysts of 250 large U.S. firms suggested that stock repurchase programs are variously a function of information asymmetry, risky stock-based incentives, and performance expectations.