Stock buybacks: some old norm should remain new

• Main Author: ZHANG, Wei
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: corporate law; stocks; Singapore; COVID-19; pandemic; public health; Business Organizations Law; Public Health
• Online Access: https://ink.library.smu.edu.sg/sol_research/3221; https://ink.library.smu.edu.sg/context/sol_research/article/5187/viewcontent/Stock_buybacks.pdf
• Institution: Singapore Management University

Corporate payouts, especially through stock buybacks, are never short of critics. COVID-19 has simply energized them further. From the energy industry to airlines and banks, US public companies are blamed for ensnaring themselves into the abysmal crisis in the midst of COVID-19 by handing out cashes extravagantly to buy back stocks years before. However, as astutely pointed out by Professors Jesse Fried and Charles Wang, the critics did not get the facts right even before COVID-19. After taking into consideration the amount of newly raised capital through equity or debt issuances, the cumulative net payouts by US public companies between 2007 and 2016 totalled just above 40% of their net income, not reaching even a half of what the critics claimed to be.