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Taking Stock: Share Buybacks and Shareholder Value

categories: Indexes, Americas, EMEAI, Investing (Investment Management), Responsible Investing, Asia Pacific, Asset Owners, Equities, Asset Managers (Quant or Fundamental), MARSHALL Ric, GRUNFELD Agnes, SERETIS Panos, general

Contrary to concerns expressed by many observers, we found no compelling evidence of a negative impact from share buybacks on long-term value creation for investors overall. We did find, however, that buybacks can impact long-term investment returns differently for active and index investors. Over the periods we observed, Companies where index investors were the largest shareholders included a much wider range of buyback impacts, good and bad, than companies where the largest shareholders were buy-and-hold investors; on average, total returns for companies where buy-and-hold investor were the largest shareholders were 18% higher than for index investor companies from 2007 to 2016.

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