12 July, 2020

Quora Answer: Why are Share Buyback Programmes Legal?


In a functioning secular legal system, everything is assumed to be legal unless there is specific reasons for it to be otherwise.  And that reason has to be based on ethics, or the public good.  How would share buybacks be contrary to either?  We can argue that a share buyback is also a means to secure growth by shoring up the stock.  It also helps the management to consolidate control, and gives some form of protection against speculation.  Also, the existing shareholders gain due to the rise in share prices.  This makes more sense than paying out a flat dividend, especially in places where there is a capital gains tax, such as the US.



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