Timing Matters: Further Evidence on Motives for Repurchases and Special Dividends

We compare the importance of opportunities for market timing with incentives to manage EPS, in decisions to repurchase. We distinguish between repurchases which are done to distribute cash (payout-related) and those which are conducted to provide shares for re-issue to staff (pay-related). Firms are more likely to pay out cash via a repurchase when timing opportunities are compelling and will opt for a special dividend otherwise. Incentives to manage EPS, on the other hand, explain less of the choice of repurchase vs. special dividend. Pay-related repurchases are likewise associated with compelling timing opportunities, and thus timing considerations also help explain decisions to repurchase shares for issue to staff.