Essays on the payout policy of high-technology firms: Motives for share repurchases and the consequences of pooling-of-interests accounting on payout behavior

This thesis examines the share repurchase behavior of high technology firms in the 1990s. After an introductory chapter, the second chapter extends previous finance and accounting research by focusing on motives for dividend and repurchase payouts that may have been unique for a comprehensive sample of high technology firms. The empirical results indicate that high technology firms repurchased shares to mitigate the effects of total options exercises and executives' unexercisable and exercisable stock options outstanding. Further, high technology firms did not distribute significant levels of dividends and had lower cash flows and book-to-market levels than firms in other industries. Additionally, the use of costly debt financing and the sales of put warrants in a firm's own stock were more frequently-used mechanisms to finance repurchases among high technology firms. Thus, the economic factors that influenced the decision to repurchase shares and the means of funding repurchases were distinct between high technology firms and firms in other industries.; The third chapter uses the limitation in ability to repurchase shares imposed by the pooling-of-interests method of accounting for acquisitions as a setting to test whether evidence exists that pooling firms would have been candidates to repurchase shares in the absence of the restrictions. The chapter also examines the extent to which the restrictions affected pooling firms. The results indicate that pooling firms appeared to repurchase significant amounts in periods unrestricted by the pooling rules. Holding all motives for repurchasing constant, pooling-of-interests led to lower levels of repurchasing. In tests of the effects of the restrictions, pooling firms, with higher levels of option exercises, and unexercisable and exercisable executive stock options than unconstrained firms, had higher levels of shares outstanding, overall. In unrestricted periods, firms that used the pooling method to account for an acquisition were more likely to borrow funds or sell put warrants to effect their repurchases, compared to firms that did not use the pooling method. Thus, the repurchase restrictions appeared to have had significant economic effects on pooling firms in both restricted and unrestricted periods.