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The best recent research on the folly of buybacks is by two professors at Europe’s top business school, INSEAD. Looking at the 60 per cent of companies that have bought back their stock between 2010 and 2015, Robert Ayres and Michael Olenick calculated that the firms, as a group, spent more than 100 per cent of their net profits on dividends and share repurchases. They also found that the more a company spent on buybacks, relatively speaking, the less good it did for the stock price.

At the 535 firms that spent the least, relatively speaking, on stock repurchases (less than 5 per cent of the company’s market value), market value grew by an average of 248 per cent. These companies included Facebook, Amazon.com, Google, Netflix and Danaher, all of which mainly used the buybacks as compensation for employees. (Amazon chief executive Jeff Bezos owns The Washington Post.)

By contrast, the 64 firms that spent the most repurchasing shares (the equivalent of 100 per cent of market value) saw an average 22 per cent decline in the firm’s market value. These include Sears, J.C. Penney, Hewlett-Packard, Macy’s, Xerox and Viacom, for all of which the primary purpose of the buybacks was to prop up the stock price in the face of disappointing operating results.

Corporate buybacks don’t just affect individual companies, however. At this scale, buybacks are also a factor in the performance of the overall economy.

Consider that US$1.2 trillion is the equivalent of more than 6 per cent of the annual output – or gross domestic product – of the United States, the world’s largest economy. It is larger than the GDP of all but the 15 largest countries in the world. And it is a sum that will likely far exceed the amount of money raised by the corporate sector’s issuing new stock, meaning that for another year, more equity capital is flowing out of publicly traded corporations than flowing in.