DO OIL COMPANY BUYBACKS CREATE NEGATIVE STOCKHOLDERS EQUITY AND IMPROVE STOCK MARKET PERFORMANCE?

摘要

In a recent research paper (Grove and Clouse 2017), the earnings management strategy of common stock buybacks was investigated for primary metals and oil companies. The "buyback growth mirage" test was used there where net income growth (or decline) was compared to earnings per share (EPS) growth (or decline). An equity valuation analyst explained this test: 'The simplest way to evaluate a company's asset allocation decisions over the years is to see whether its net profit growth is close to its EPS growth. Unlike an investment in the business, share buybacks have no effect on net profit and there is no compounding in future years' (Morgenson 2016).