Why Buybacks Matter

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Share buybacks have become a major focus of conversation within the investment industry—most recently due to speculation that if the U.S. government were to institute some sort of “repatriation holiday,” profits currently being held overseas to avoid taxation would be utilized largely for share repurchases to thereby “goose” earnings-per-share (EPS) growth by reducing the number of shares outstanding. However, in a broader sense, do firms that implement share buyback programs actually lead to stronger returns?

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