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So if they hadn't done these buybacks, they could have deployed the capital in a number of different areas, including paying down existing debt. They now could

by mox1 7y ago

So if they hadn't done these buybacks, they could have deployed the capital in a number of different areas, including paying down existing debt. They now could add additional debt (bonds, loans, etc) at good rates. In general in personal finance the first rule of excess capots is to aggressively pay down existing debts, why do corporations do that? Many of these same companies floated bonds for their buybacks!

jtchang 7y ago
Corporations don't do it because they can get capitally more cheaply. It's all about incentives. Corporations are incentivized to run their operations on cheap capital.
linuxftw 7y ago
Artificially low interest rates, government entities buying corporate bonds for 'liquidity' (aka, bailing out the banks that shouldn't have ever made the loans in the first place) create the incentives for companies to borrow heavily and artificially boost EPS. There's literally no reason for a company to not do this.
- StillBored 7y ago
  Except for like illicit drugs, they become dependent on it. If the supply dries up they are in serious trouble. Building your business on cheap debt seems like really short term thinking...