Need help with your Discussion

Get a timely done, PLAGIARISM-FREE paper
from our highly-qualified writers!

glass
pen
clip
papers
heaphones

Buyback Common Stocks

Buyback Common Stocks

Buyback Common Stocks

Identify three reasons why a firm might buy back its own common stock shares.

Companies may opt to buyback issued shares in response to various concerns; the key among them is the need to cut operational costs. Ideally, the need to participate in capital generation through share issuance fetches its support from the targeted contributions of the generated funds in promoting the operations of the firm. As a result, participation in such decisions involves a further reflection on the expectations of the firm from an investment perspective (Bulow & Klemperer, 2015). Having excess capital implies meeting additional concerns, such as revenue sharing and expenses in running the firm. As a result, the firm may opt to rebuy issued common stocks to cut on the operations costs associated with their excessive issuance.

The buyback of common stocks may seek to address concerns regarding the price of the stock. Investors tend to manifest an increased concern about the share price and their implication on the performance of the firm. Issuing new shares tends to have a negative impact on the stock performance due to the implications suggested to the dividends. New shareholders expand the dividend-sharing population. As a result, the stock performance tends to drop as investors opt to offload their stakes in search of profitable shares (Hillert et al., 2016). On implication, a firm may opt to buyback the issued shares in the quest to manage the impact suggested on the share prices.

The third reason a company may opt to buyback the issued shares involves addressing the financial concerns associated with the generated income. Ideally, a firm’s operations tend to rest on the expectations expressed against the eventual earnings per share. Firms with idling or excess shares tend to complicate their earning prospect by expanding the distribution base. In most cases, such moves tend to remain unattractive to the shareholders and the eventual impression associated with the firm’s financial position (Huang, 2015). As a result, the firm may opt to buyback such shares to allow the attainment of the desired impression in financial performance.

References

Bulow, J., & Klemperer, P. (2015). Equity recourse notes: creating counter‐cyclical bank capital. The Economic Journal125(586), F131-F157.

Hillert, A., Maug, E., & Obernberger, S. (2016). Stock repurchases and liquidity. Journal of financial economics119(1), 186-209.

Huang, C. W. (2015). Takeover vulnerability and the credibility of signaling: The case of open-market share repurchases. Journal of Banking & Finance58, 405-417.

ORDER A PLAGIARISM-FREE PAPER HERE

We’ll write everything from scratch

Question 


Buyback Common Stocks

Identify three reasons why a firm might buy back its own common stock shares.

Buyback Common Stocks

Buyback Common Stocks

Have a similar assignment? "Place an order for your assignment and have exceptional work written by our team of experts, guaranteeing you A results."

Order Solution Now

Our Service Charter


1. Professional & Expert Writers: Eminence Papers only hires the best. Our writers are specially selected and recruited, after which they undergo further training to perfect their skills for specialization purposes. Moreover, our writers are holders of masters and Ph.D. degrees. They have impressive academic records, besides being native English speakers.

2. Top Quality Papers: Our customers are always guaranteed of papers that exceed their expectations. All our writers have +5 years of experience. This implies that all papers are written by individuals who are experts in their fields. In addition, the quality team reviews all the papers before sending them to the customers.

3. Plagiarism-Free Papers: All papers provided by Eminence Papers are written from scratch. Appropriate referencing and citation of key information are followed. Plagiarism checkers are used by the Quality assurance team and our editors just to double-check that there are no instances of plagiarism.

4. Timely Delivery: Time wasted is equivalent to a failed dedication and commitment. Eminence Papers are known for the timely delivery of any pending customer orders. Customers are well informed of the progress of their papers to ensure they keep track of what the writer is providing before the final draft is sent for grading.

5. Affordable Prices: Our prices are fairly structured to fit in all groups. Any customer willing to place their assignments with us can do so at very affordable prices. In addition, our customers enjoy regular discounts and bonuses.

6. 24/7 Customer Support: At Eminence Papers, we have put in place a team of experts who answer all customer inquiries promptly. The best part is the ever-availability of the team. Customers can make inquiries anytime.

We Can Write It for You! Enjoy 20% OFF on This Order. Use Code SAVE20

Stuck with your Assignment?

Enjoy 20% OFF Today
Use code SAVE20