Quantitative Corporate Finance

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Share Repurchase and a Heterogeneous Investor Base

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In a recent post, Felix Salmon suggests that Dell has done a disservice to its equity investors:

A buy-and-hold shareholder in Dell is looking particularly idiotic right now. If you bought 15 years ago at $10.84, you should expect to have at least $15.40 in value at this point: after all: that’s how much the company has made since then. Instead, you have less than you started with. And all the extra money went to fickle shareholders who sold their stock back to the company.

Would Dell’s shareholders have been better off with a dividend?  Let’s investigate.. [Read more…]

Share Repurchase Literature Survey

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This post is a quick survey of recent literature regarding share repurchases.  We look at who repurchases shares, why they do it, and whether repurchase activity affects the price or liquidity of equities.

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Share Repurchase Myths

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There’s a surprising amount of misleading writing about capital distribution, and in particular the issue of dividend vs. share repurchase.  In this post we’ll examine some common canards. [Read more…]

The Economic Irrelevance of Distribution Form

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A recent article in the Economist suggests that managers with exposure to their firm’s share price would benefit by reducing dividends and instead buying back shares.  From a strictly economic point of view, we don’t see the difference. [Read more…]

The End of Dividends

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Once the dominant form of capital return, regular dividends have been in secular decline since the early 1980s.  In this post we consider why. [Read more…]