AN EXAMINATION OF CORPORATE STOCK BUYBACKS: DO THEY REALLY CREATE VALUE?
AN EXAMINATION OF CORPORATE STOCK BUYBACKS: DO THEY REALLY CREATE VALUE?

Summary/Abstract: Corporate stock buybacks have become increasingly popular in recent years and are typically rationalized as a means of increasing shareholder wealth. However, most empirical studies have only examined short term market reactions to announcements of stock buybacks. Although findings often reveal significant positive abnormal returns, very few studies have examined the longer term value creation consequences. This paper considers the stock buyback, its potential drawbacks, and empirically explores the longer term results in terms of market capitalization changes. Although other intervening variables may have an influence, our findings do suggest that longer term shareholder value is elusive following corporate stock buybacks. pp. 11–28JEL codes: G34; M14; O16

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