Szládek Dániel

Share repurchases instead of dividend payments?

The evolution of payout policies and possible reasons for the prominence of share repurchases

The goal of corporate finance is to maximize the value of the firm, and to achieve this, firms seek optimal investment, financing, and dividend policies. In recent decades, the latter has undergone a significant change, with companies increasingly relying on a different method of returning money to shareholders: share buybacks or repurchases, in addition to the classic dividend payment. In a share repurchase, the firm buys back its own shares, paying the selling shareholder out of the firms cash, similarly to a dividend payment. The rise to prominence of share repurchases is a fresh topic for corporate finance researchers and finance executives alike, as the issue regarding payout is now not only about quantity but also about the form of the payout. Accordingly, it is better to refer to this aspect of corporate finance by the term payout policy rather than dividend policy. In this study, I focus on how much of the total shareholder payout is done via share repurchases, how share repurchases are perceived and valued by the market, and explore the theoretical background of this novel payout method.

LXXI. évf., 2024. February (154 - 175. O.), DOI:10.18414/KSZ.2024.2.154, Study

(PDF format, 252.1 kB)