Repurchase Dividend Reinvestment Plans (Repurchase DRIPS)

Abstract

We investigate the determinants of firms' decision to offer Repurchase Dividend Reinvestment Plans (Repurchase DRIPs). Firm size, managerial share holding, and free cash flow are statistically significant in explaining a firm’s decision to employ Repurchase DRIPs. We find that managerial stock ownership is negatively related to use of Repurchase DRIPs. Economies of scale in marketing and maintaining DRIP program and excess cash flows are positively related to Repurchase DRIP adoption. We find no evidence that information asymmetry is a major motivation to the likelihoods of using Repurchase DRIPs.