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Article Dans Une Revue (Article De Synthèse) Harvard business review Année : 2020

Why Stock Buybacks Are Dangerous for the Economy

William Lazonick
  • Fonction : Auteur
Matt Hopkins
  • Fonction : Auteur

Résumé

Even as the United States continues to experience its longest economic expansion since World War II, concern is growing that soaring corporate debt will make the economy susceptible to a contraction that could get out of control. The root cause of this concern is the trillions of dollars that major U.S. corporations have spent on open-market repurchases (aka “stock buybacks”) since the financial crisis a decade ago. In 2018 alone, with corporate profits bolstered by the Tax Cuts and Jobs Act of 2017, companies in the S&P 500 Index did a combined $806 billion in buybacks, about $200 billion more than the previous record set in 2007. When companies do these buybacks, they deprive themselves of the liquidity that might help them cope when sales and profits decline in an economic downturn. Making matters worse, the proportion of buybacks funded by corporate bonds reached as high as 30% in both 2016 and 2017, according to JPMorgan Chase.
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Dates et versions

hal-03987814 , version 1 (14-02-2023)

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  • HAL Id : hal-03987814 , version 1

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William Lazonick, Mustafa Erdem Sakinç, Matt Hopkins. Why Stock Buybacks Are Dangerous for the Economy. Harvard business review, 2020. ⟨hal-03987814⟩
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