The Buyback Bonanza Makes a Return

Recently, there has been a trend among both Canadian and United States companies to buy back their shares in order to boost stock prices. In the past – most notably during the “Buyback Bonanza” of 2007 – this strategy has been employed by companies as a mechanism to decrease the amount of outstanding shares, thereby increasing the value of the stock. For years some have criticized share buybacks, asserting that focusing on short term increases in stock prices and profits is detrimental to long term economic growth. They argue that as individuals invest more in the short term, there is less investment to be made in capital improvements such as factories and technology. In their view, this has two negative implications: less investment translates to decreased earnings in the long-term and decreased future growth. Others argue that short-termism is not a problem or, to the extent it is, is not as harmful to the economy as once believed. Statistics…

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