When share repurchases increase debt and reduce spending on innovation and R&D it directly affects a firm’s long-term ability to survive and grow in a disruptive and uncertain business environment, according to research from business school Insead. Over five years, Insead studied 1,839 the United States public companies and found that the more money a firm spends on buybacks, the less likely it is to grow over the long-term. It gave examples of IBM, General Electric, Sears, The Gap, JCPenney and Macy's as companies that have spent heavily on share buybacks as their share prices declined.
When share repurchases increase debt and reduce spending on innovation and R&D it directly affects a firm’s long-term ability to survive and grow in a disruptive and uncertain business environment, according to research from business school Insead. Over five years, Insead studied 1,839 US public companies and found that the more money a firm spends on buybacks, the less likely it is to grow over the long-term. It gave examples of IBM, General Electric, Sears, The Gap, JCPenney and Macy's as companies that have spent heavily on share buybacks as their share prices declined.