Do share repurchases suppress corporate investments?

Sammanfattning

This thesis focusses on catalysts for share repurchases, alongside their long-term impact on investments, by using a panel dataset overlooking a sample of publicly listed firms in north American markets from 2010 through 2025. We use ordinary least squares regression models, lagging the explanatory variables to examine the year over year effect change in research and development expenditures alongside capital expenditures. Our empirical results uncover dynamics linking buyback programs and different investments. We fail to find evidence that support share repurchases affecting the CAPEX growth, while we demonstrate robust and statistically significant negative relationship between buybacks and R&D investments. Increased intensity in repurchases is clearly associated with deceleration in the R&D growth, which reinforces “managerial short-termism” and corporate value extraction concepts.Further reinforcement for our models is used with a binary probability model that checks the causal direction of our findings. This supports that buybacks substitute future investments alongside absorbing residual cash. These findings highlight a trade-off amongst modern corporate environments where stock-based compensation is present and managerial bonuses tied to certain metrics influencing policies for share repurchases affecting long term investments.