The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness (CCMC) maintains, via recently released study findings, stock buybacks benefit investors, reduce volatility and promote efficient capital allocation.
The analysis — Corporate Liquidity Provision and Share Repurchase Programs — provided a sample of over 10,000 domestic companies across a 17-year period.
“Fifty percent of Americans are invested in the stock market and stock buybacks, like dividends, are a critical means to distribute earnings,” Tom Quaadman, executive vice president of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, said. “Buybacks give investors a return on their money allowing them to reinvest it in other companies. Capital that flows to shareholders is reinvested in innovative public and private companies of all sizes, including small businesses. Proposals that limit or restrict allocation of capital either through regulation or by tax policy will have a negative effect on our continued recovery from the pandemic and long-term growth.”
The study revealed, per officials, stock buybacks generate economic benefits for retail investors accounting for more than 20 percent of trading volume;
buybacks reduce realized and anticipated return volatility; managers use market-based estimates of future volatility to inform buyback decisions; and
economic policy uncertainty results in increased stock price volatility and illiquidity.