Stock Repurchases and Long-Term Investor Returns: An Empirical Investigation

Abstract

Stock repurchases by U.S. firms have been reported by prior studies to cause positive stock price reactions around the announcement dates. However, the question of whether an investable portfolio of repurchasing firms reconstituted at the beginning of each year outperforms a broad market index in the long run has not been addressed. This study finds that investing in the Invesco Buyback Achievers ETF (PKW), which invests in the shares of repurchasing firms, outperformed S&P 500 on a risk-adjusted basis over 5-, 10- and 15-year periods. This finding is consistent with the goal of shareholder wealth maximization, which emphasizes the return of free cash flow to shareholders.