A tricky business
3 April 2012
Many companies have recently made share buybacks, which can be beneficial but can also lead to extreme difficulties when economic conditions change
In the last few years, many companies have made share buybacks. Why? A company buys back its own shares mainly because it increases earnings per share, the share price and the value of executive stock options.
Increasing earnings per share works if interest rates and the share price are low. In some businesses, the interest earned on surplus cash would be lower...