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Why Are Stocks Repurchases the Best Payout Alternative Method?

In: Business and Management

Submitted By goldenstature
Words 2855
Pages 12
Syracuse University

A Literature Review: Why are stocks repurchases the best payout alternative method?

Willie Reddic

Table of Contents

1.0 Introduction.……............................................................................................................3 2.0 Beginning Literature of Dividends and the Movement towards Repurchases .......3 3.0 Methods of Repurchases and Key Definition ...............................................................4 4.0 The Positives and Negatives on Methods of Repurchases ……....................................5 5.0 Summary and Conclusion ...........................................................................................10 6.0 References.....................................................................................................................11

1.0 Introduction
“A share repurchase distributes cash to existing shareholders in exchange for a fraction of the firm's outstanding equity. That is, cash is exchanged for a reduction in the number of shares outstanding.” (Wikipedia Foundation, Inc.) The intent of this paper is to review stock repurchases

as the preferred method of alternative payout for shareholders. There are many reasons why firms choose this option. Past literature shows substantial evidence of reasons that range from capital structure adjustments to takeover defense (Bagwell, 1991). However, in my opinion the strongest reason is because stock repurchases can be used as another method of paying out shareholders in the form of a dividend. In recent times, there have been multiple literary publications that proved that repurchasing is a viable option for firms. In the first section of this paper, I will provide a beginning overview of dividends and how stock repurchases became the new phenomenon during the late 1980s. The second part of this paper will focus on the different types...

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