Share repurchases do not always create value.

Question

Quizplus · Accepted Answer

While share repurchases can benefit shareholders by reducing the number of shares outstanding and potentially increasing earnings per share, they do not always create value. If a company engages in share repurchases at a time when its shares are overvalued, it can result in the company overpaying for its own stock and destroying value for shareholders. Additionally, if a company uses debt to finance the repurchases, it can increase leverage and risk for the company, which can also destroy value for shareholders. Therefore, it's important to evaluate the reasons and timing behind a company's decision to engage in share repurchases before determining if it will create value for shareholders.

Share Repurchases Do Not Always Create Value