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Share Repurchases, Option Exercises, and Executives Opportunistic Behavior
Naser Khaledi,
Purdue University Calumet
ABSTRACT. This study examines whether executives opportunistically repurchase shares to boost stock prices prior to exercising their options, and also examines whether executives are involved in insider trading by exercising options around share repurchase announcements. The sample employed in this study covers the years 2000-2002 for the financial and executives’ data and the years 1995-2002 for insider trading data. The final sample consists of 577 share repurchases firm-year observations and 651 share repurchase announcements. I document significant results of executives’ opportunistic share repurchases prior to the exercise of options. I also document significant results consistent with insider trading around share repurchase announcements using a single-announcement sample and weaker evidence of insider trading using a multiple-announcements sample.
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