Essays on corporate share repurchase and household portfolio choices

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dc.contributor Mobbs, Houston Shawn
dc.contributor Kong, Lei
dc.contributor Lee, Junsoo
dc.contributor Stinson, Shane R.
dc.contributor.advisor Cook, Douglas O.
dc.contributor.author Zhang, Weiwei
dc.date.accessioned 2018-06-04T14:58:13Z
dc.date.available 2018-06-04T14:58:13Z
dc.date.issued 2017
dc.identifier.other u0015_0000001_0002898
dc.identifier.other Zhang_alatus_0004D_13296
dc.identifier.uri http://ir.ua.edu/handle/123456789/3574
dc.description Electronic Thesis or Dissertation
dc.description.abstract This dissertation consists of two empirical essays and one theoretical essay. In the first essay, I investigate how sensitivity of CEO’s pay-for-performance compensation to stock prices affects firm’s payout and investment policies. On the company’s payout side, we find that higher delta CEOs tend to execute more share buybacks and pay fewer cash dividends. The evidence supports the notion that stock price sensitive executives particularly favor repurchases as the payout form. On the investment side, we find that higher delta CEOs allocate more money towards share buybacks, direct fewer investment resources to capital expenditures, and cut back employment. Additionally, repurchasing firms experience deterioration in operating performance subsequently following the repurchases. Our result suggests that the sensitivity of executives’ compensation to stock price induces CEOs to favor short-term performance over long-term performance. In the second essay, I use an ex-ante and forward-looking stock mispricing measure to examine whether and how equity misvaluation affects corporate stock repurchase activities. In particular, we obtain the equity mispricing measure P/V by normalizing prevailing stock price with the firm’s intrinsic value based on Residual Income Model (RIM). In particular, I find that undervalued firms are more likely to conduct buybacks and tend to repurchase more in terms of the percentage of market value of equity and dollar volume of the repurchase. These evidence suggest that equity undervaluation serves as a significant determinant for companies to undertake actual stock repurchase. The primary goal of the third essay is to explain family investment decisions under the assumptions of household member’s preferences and efficient risk sharing among them based on the collective household model. By examining the absolute (relative) risk aversions of household welfare function, we demonstrate how household’s portfolio allocation in stocks changes with family wealth. This paper examines two types of preference heterogeneity between spouses: parameter heterogeneity and functional form heterogeneity. This study offers an alternative explanation of household portfolio choice corresponding with the observation that wealthier households tend to hold greater share of family wealth in risky assets.
dc.format.extent 140 p.
dc.format.medium electronic
dc.format.mimetype application/pdf
dc.language English
dc.language.iso en_US
dc.publisher University of Alabama Libraries
dc.relation.ispartof The University of Alabama Electronic Theses and Dissertations
dc.relation.ispartof The University of Alabama Libraries Digital Collections
dc.relation.hasversion born digital
dc.rights All rights reserved by the author unless otherwise indicated.
dc.subject.other Finance
dc.title Essays on corporate share repurchase and household portfolio choices
dc.type thesis
dc.type text
etdms.degree.department University of Alabama. Dept. of Economics, Finance, and Legal Studies
etdms.degree.discipline Finance
etdms.degree.grantor The University of Alabama
etdms.degree.level doctoral
etdms.degree.name Ph.D.


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