Buybacks being more tax efficient are a part of the story, but I don't think that's the primary reason companies use them. They're also a lot more flexible. If

Buybacks being more tax efficient are a part of the story, but I don't think that's the primary reason companies use them. They're also a lot more flexible. If you pay a dividend you set the expectation that you will continue to pay that dividend and cutting the dividend crushes your share price. Buybacks don't carry the same expectation so in lean times you're not forced to signal to the market that management is not confident in the company's future earnings. They also offer a way of artificially propping up the company's stock price in bad times by using cash reserves to buy back shares. They also artificially increase earnings per share and a lot of executives have bonus targets tied to that.