Stock Buybacks and Financial Turmoil: Pros and Cons for Investors

Foued Hamouda

Chapter 72 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 2265-2292 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Buyback programs are often used by firms for different purposes, including distributing excess cash to shareholders and signal that the stock price is underpriced. The first purpose of this chapter is to review studies of buyback programs and to highlight that fundamentals-based hypotheses are problematic in financial turmoil. We will show how buyback programs add value to shareholders while also identifying some situations in which they can destroy value. The second purpose is to present the pros and cons of buyback programs to shareholders, particularly during financial turmoil.

Keywords: Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G3 M41 M42 (search for similar items in EconPapers)
Date: 2024
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