Abstract

Stock repurchase should be viewed rationally as a potentially beneficial use of corporate funds and may be sound company policy for both tactical and strategic reasons. Certain financial situations make repurchase particularly desirable. Corporate repurchase of securities has become an increasingly common activity. In 1965, for example, $3,242 billion of stock was retired and only $3,205 billion issued. Stock repurchased exceeded stock issued. Many companies have been quite active in buying their own shares. There are many reasons for repurchasing common stock. One amongst them is investment. It is with this reason, share repurchase as an investment, that this article deals. A rational evaluation is often quite difficult because stock repurchase seems to stir strong emotions. Perhaps this is because some of those companies receiving the most publicity for share repurchase are regarded as being run by financial operators. Among the arguments against share repurchase are that it is manipulative, unfair to stockholders, a sign of management defeatism, and that it involves inside information.