Regulating stock buybacks: the $6.3 trillion question

Abstract

ABSTRACT Corporate resource allocation decisions shape business investment, income distribution, and productivity growth. Stock buybacks––a term denoting when a corporation repurchases its own shares on the open market––manipulate stock prices and enrich senior corporate executives and hedge fund managers. We argue that the growing distribution of corporate funds to share-sellers via stock buybacks is a source of productivity fragility in the US economy. This article presents new data on the use of stock buybacks by US corporations in 2010–2019. We show the widespread and growing use of stock buybacks across industries and sectors and describe policies that will curb the excessive use of corporate funds on stock buybacks.