Gaming the Float: How Managers Respond to EPS-based Incentives

Table 2: Determinants of Shares Outstanding
This table presents OLS cross sectional regression models of shares outstanding as a function of firm characteristics. Shares outstanding
is measured as the total number of shares outstanding (1000’s) from CRSP at the end of the quarter. Net Income Volatility is the
standard deviation of Net Income over the previous 12 quarters. Net Income Forecast Error Volatility - Naive is the standard deviation of
the the difference between actual earnings and an expectation of earnings based on the earnings from 4 quarters prior plus the difference
between the earnings 4 quarters and 8 quarters prior. Net Income Forecast Error Volatility - Analyst is the standard deviation of the
the difference between actual earnings and median IBES forecast of earnings. Market to Book is total market equity plus the book value
of total debt divided by total assets. Net Income is from Compustat at quarter end. Market Cap is the total market capitalization in
millions at the quarter end. Institutional ownership is percent ownership of all institutions. Return Volatility is the standard deviation
of daily stock returns over the prior 90 days. Annual Return is the past 12 month stock return. The Amihud measure of illiquidity
calculated over the previous 90 days. Incentive Comp is the percent of total compensation made up by bonus, stock, and option grants.
(1) (2) (3) (4)
Shares Shares Shares Shares
VARIABLES Outstanding Outstanding Outstanding Outstanding
Net Income Volatility t−1 0.21*** 0.25***
(0.01) (0.01)
Net Income Volatility - Naive Forecast t−1 0.21***
(0.01)
Net Income Volatility - Analyst Forecast t−1 0.30***
(0.02)
Market to Book t−1 0.01*** 0.01*** -0.01** -0.02**
(0.00) (0.00) (0.00) (0.01)
Net Income t−1 -0.11*** -0.11*** -0.09*** -0.07***
(0.01) (0.01) (0.01) (0.01)
Institutional Ownership t−1 0.01** 0.01*** 0.00 -0.14***
(0.00) (0.00) (0.01) (0.02)
Market Cap t−1 0.84*** 0.85*** 0.77*** 0.76***
(0.01) (0.01) (0.01) (0.01)
Annual Return t−1 -0.04*** -0.04*** -0.05*** -0.10***
(0.00) (0.00) (0.00) (0.01)
Amihud t−1 -0.05*** -0.06*** -0.11*** -0.43***
(0.00) (0.00) (0.00) (0.13)
Return Volatility t−1 0.05*** 0.06*** 0.06*** 0.12***
(0.00) (0.00) (0.00) (0.01)
Incentive Comp t−1 0.05***
(0.01)
Constant -0.04*** -0.03*** 0.03** 0.11*
(0.01) (0.01) (0.02) (0.06)
Year Effects Y Y
Observations 582,754 486,137 332,578 120,635
R-squared 0.81 0.81 0.81 0.82
Standard errors clustered by firm in parentheses
*** p