Stock Repurchasing and Corporate Social Responsibility

Stock repurchases are popular. Between January 2009 and 2018, S&P 500 firms spent $4.3 trillion to buy back their shares, which is significantly more than these firms spent on dividend payments to their shareholders (Lazonick, Sakinç, and Hopkins, 2020). Stock repurchases are also controversial. Skeptics argue that, contrary to what managers claim, repurchasing isn’t done to buy undervalued stocks but to benefit the managers themselves. Shilon (2020) cites examples of how managers repurchase stocks to meet earnings-per-share (EPS) targets set in their compensation contracts and thus increase their personal compensation. Nguyen, Vu, and Yin (2020) reveal a negative association between … Read more