Suchergebnisse

This paper introduces the increasing use of share buybacks in western countries with different motivations especially on the part of top management. After exploring the impact of share buybacks on earnings per share and cash, the paper critically examines if it is really a payout in order to return money to shareholders as claimed by some companies. In many cases, there are some traces of management's hidden motivation to use share buyback to their interest rather than the interest of minority shareholders, because most of the decisions are flexible giving choice to management. Finally, the paper suggests shareholders and investors to be careful in making share buyback decisions, and recommends regulatory authorities to be alert and protect the shareholders by tightening their legislation and regulations.

AbstractResearch Question/IssueOn August 19, 2019, the Business Roundtable (2019) released a statement signed by 181 chief executive officers (CEOs) of well‐known US corporations, in which they pledged "a fundamental commitment" to "deliver value to all" stakeholders. This study examines the stock market reaction to this new statement on the purpose of a corporation.Research Findings/InsightsBased on a sample of 163 publicly listed companies that signed the pledge, the results show that investors react positively to a firm's pledge in the days surrounding the statement release. The consensus among stock market investors was robust, characterized by the low volatility in the share price post‐announcement date. The decision by these companies, though intended to maximize the wealth of all stakeholders, rather than shareholders alone, carries an opportunity cost. Specifically, a post‐announcement decline in share buybacks by pledge firms relative to control firms is observed, though investors embracing stakeholder theory appear undeterred by the reduction in distributions.Theoretical/Academic ImplicationsThis study provides empirical support that, in the evolving business environment, companies must emphasize issues that concern customers, employees, non‐governmental organizations (NGOs), and the government. Failure to prioritize these issues may engender public backlash, especially in the age of social media. However, the attention to stakeholders is compatible with the focus on shareholder performance. Performance suffers when customers leave, workers feel dissatisfied, NGOs call for boycotts, and governments levy fines. Corporations seeking to increase shareholder wealth will need to fully embrace stakeholder concerns.Practitioner/Policy ImplicationsThis study shows that adopting a stakeholder perspective unlocked value that would not have been achieved had the focus remained on shareholder primacy. The excess values may derive from greater customer loyalty, improved employee motivation, better supplier relations, supportive financiers, maximizing revenue, minimizing costs, and/or yielding higher profits. Shareholders anticipate greater long‐term value from companies emphasizing employees, communities, supply chain, financiers, and shareholders.