Business, Economics

Buybacks (or Corporate Suicide)

Prof. Robert Ayres asked me for help with a data project examining the relationship between buyback and growth in market value. Many have studied the effect on buybacks but rarely on overall market cap growth.

What we found was surprising.

Some items that pop out:

Sears spent $6.92 billion buying stock. The company is now worth $729 million. Over the past five years their market value has contracted by 87 percent.

HP is now worth $30 billion. But HP spent $81.56 billion buying their own it’s stock. The company has contracted 25 percent in market value in the past five years.

Xerox spent $8.6 billion; it is now worth $7.2 billion. The market value contracted 30 percent over the past five years.

Click here for Prof. Ayres thoughts.

Here is a working copy of the paper:

Click Here for the paper.

See also: Original Shareholder Value Article – Milton Friedman to GM: Build Clunky Cars

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