The standard model of repurchases says that companies repurchase stock when they have excess cash that can’t be redeployed efficiently in the company. In the standard model, an increase in repurchases has no effect on other corporate policies such as investment, R&D and employment. This model doesn’t support a tax on repurchases or other regulation that increases the cost of stock repurchases for companies. Recent research has shown that the standard model is incomplete. Companies repurchase stock to manage earnings, but since EPS-motivated repurchases are not driven by excess cash, this can take a toll on other corporate policies.
Join us for this webinar, led by Heitor Almeida, Professor and Academic Director of iDegrees and Stanley C. and Joan J. Golder Distinguished Chair in Corporate Finance as he explains why:
- The long-term effects of EPS-motivated repurchases on company performance are still being debated
- This recent research still does not support direct government intervention on corporate repurchases
- Investors and companies should move away from EPS as a measure of corporate performance
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