Stock Repurchase Programs: A Key to Stronger Investments?

Abstract

This paper investigates whether companies that institute large buybacks will see a large stock increase in subsequent quarters. If the hypothesis holds, we should observe a correlation between buyback value and stock performance relative to the S&P 500. This could provide investors with a predictive tool for movements in stock, and potentially enhance safety. We analyzed data from 2022-2023 from the top 10 largest companies by market cap (as of 8/9/2024)  in the S&P 500 and Russell 2000, comparing it to a control group, the S&P 500. Data regarding common shares outstanding, net income, short/long/total liabilities, and buyback value per quarter were gathered from each company's 10-Qs and 10-K’s. Closing share prices were obtained from Yahoo Finance. This study revealed no correlation between buyback value and company performance. However, the data provides insight into the financial characteristics of companies that engage in buybacks, how company performance changes as repurchase values grow, and comparison between stock repurchases between the S&P 500 and the Russell 2000.