Academic literature on the topic 'On-market share repurchases'

Investors can benefit when incorporating the information-signalling effect of share repurchases in their investment strategies. Previous South African studies on open market share repurchases confirmed the globally observed signalling-effect, but found open market share repurchases not to be the outright favoured share repurchase type in this country – as is the case globally. The present study is the first to examine the market reaction to the preferred share repurchase type, namely specific (or tender and private offers) share repurchases, in the South African regulatory environment. Abnormal returns were calculated using a 12-parameter benchmark over a four-year event window, for share repurchases announced from 1999 to 2009. Pro rata tender offers were found not to possess information-signalling benefits, but significant excess returns subsequent to the announcement date were reported for the two private offer types (namely other specific offers and the repurchase by the holding company of shares held by subsidiaries). The other specific offers were found to possess significant information-signalling benefits – especially over the long term and in respect of value companies.

Purpose – The purpose of this study is to examine factors influencing decisions to repurchase shares on-market in Australia. The present study also examines the role of board size, board independence and chief executive officer duality on the decision to repurchase shares on-market by Australian firms. Design/methodology/approach – This study blends the traditional motivations of share repurchases with the influences of governance. The sample consists of all non-financial firms included in the Australian All Ordinaries Index (AOI) for the period 2004-2010. The repurchase sample consists of 104 repurchases undertaken by 62 firms. A probit panel model is used to analyse the decision to repurchase shares on the market. To account for unobserved heterogeneity, random effects panel models are also used. Findings – Analyses of a sample of non-financial firms included in the AOI for the period 2004-2010 show that size is significantly positively correlated with the decision to repurchase shares, thus supporting the agency cost. Findings also support the undervaluation and signalling hypotheses. Similarly, there is evidence in support of the view that firms repurchase shares to reach their target optimal capital structure. The present study also finds a significant positive association between board independence and the decision to repurchase shares in Australia. Research limitations/implications – On-market share repurchases help firms to signal their future growth opportunities and resolve agency conflicts. Signals from repurchases also help markets discover the true fundamental values of firms. Governance plays an important role in improving the effectiveness of on-market share repurchases, as independent directors provide both monitoring and discipline which helps to ensure that firms have valid motivations in undertaking share repurchases. Practical implications – These findings have implications for capital restructuring and governance policies. Principle-based governance frameworks that prevail in countries like Australia work as well as rule-based governance. Originality/value – This study highlights the complementary roles that financial policies and corporate boards play in corporate governance. Independent boards ensure that firms pursue appropriate financial policies that help resolve agency conflicts and information asymmetry problems.

Research background: Payout policy has attracted a great deal of research, how-ever it still has not been satisfactorily explained why corporations repurchase their shares. The most popular explanation for share repurchases is their signaling power. An alternative explanation for share repurchases is related to free cash flow. We assume that both theories are not competitive, due to the fact that the motives for share repurchases may differ depending on the firm’s life cycle stage.Purpose of the article: The aim of the paper is to test the hypotheses that companies in growth stage are more prone to repurchase their shares due to the their undervaluation.Methods: Our analysis focuses on 116 repurchase on WSE and 47 repurchase on NewCon-nect in Poland during the period 2004–2016 to test the hypothesis. We assume that companies listed on WSE are in their mature stage while listed on NewConnect are in the growth stage. We use market value to book the value ratio (M/BV) and the relation of M/BV ratio for the repurchasing company to the M/BV ratio for the whole market at the date of implementing share repurchase program as a proxies for firm valuation.Findings & Value added: Our study does not confirm that repurchased companies at a growth stage are more undervalued than repurchased companies at a mature stage (at statistically significant level), however there are more repurchased companies at a growth stage with lower M/BV value than repurchase companies in mature stage. Adding corporate life cycle theory into the study, our result can contribute to the literature by more distinctly understanding the motivation of share repurchases. The results might be helpful for companies to determine their financial policies and for investors to determine their investment decisions.

This paper relates informed repurchases to firm information asymmetry. We propose a new measure of informed repurchases, which is based on causality tests relating repurchase information to firm returns. Our results indicate that informed repurchases show larger abnormal returns surrounding the announcement of an open market share repurchase, which suggests the market at least partially recognizes informed repurchases. This holds after controlling for conventional information asymmetry proxies, such as firm size, number of analysts following, and analyst forecast dispersion, indicating that the market is aware of repurchase specific information not captured by traditional information asymmetry proxies. Informed repurchases demonstrate larger long-term abnormal returns at one, two, and three-year windows than high traditional information asymmetry repurchases.

This study examines how treasury shares held by Korea’s publicly traded firms may affect firm value. Unlike in the U.S., where repurchased shares are immediately subtracted from market capitalization, and thus, constitute a genuine payout mechanism, Korean stock market practice retains the value of repurchased shares in market capitalization, effectively treating treasury shares as a form of an asset. Korean investors do not consider share repurchase as a payout mechanism until the repurchased shares are formally cancelled. We find that share repurchases are followed by positive market reactions, which is consistent with the results of previous research, but the reactions are even larger on the cancellation disclosure date. More importantly, firms with larger treasury shares in stock exhibit a 24% lower Tobin’s q compared to those firms with smaller treasury shares. These findings suggest that the market anticipates that treasury shares may be used as a potential antitakeover measure at a later date, which is reflected in the current market value.

While most papers in finance literature investigate how the stock market reacts to announcements of corporate events, very few study the opposite, how namely, the manager responds to the information from outside investors. In this paper, we examine this issue, using open market share repurchases. Open market share repurchase offers flexibility for the manager to decide whether or not to buy back shares. Therefore, the manager may refer to the opinions of outside investors and make the decision, based on actual buyback activities. We propose learning, over-confidence and timing hypotheses to interpret the behavior of the managerial response to initial market reaction on the share repurchase announcement. Empirically, if a repurchase announcement abnormal return is low, then the manager tends to achieve the repurchase announced ratio by purchasing more shares. In addition, the investor will positively react to this repurchase in the long run. These empirical findings are consistent with the market timing hypothesis, which implies that managers know the true value of their firms better than the market at the moment of the share repurchase announcement.

Purpose – The purpose of this paper is to examine whether firms engage in earnings decreasing management before share repurchases to mislead investors or to smooth earnings and improve earnings informativeness. Design/methodology/approach – The authors examine discretionary accruals and cash flows around open-market share repurchases. The primary discretionary accruals measure is industry- and performance-adjusted discretionary current accruals estimated from cash-flow data. Findings – Results show that, firms experience temporary increases in operating cash flows and use negative discretionary accruals to smooth earnings before share repurchases. Firms with the highest pre-repurchase cash flows use the lowest pre-repurchase discretionary accruals. Moreover, pre-repurchase discretionary accruals reflect expectations about future operating cash flows. Firms with the strongest deterioration in operating cash flows after repurchases use the lowest pre-repurchase discretionary accruals. These findings suggest that repurchasing firms use earnings management to increase smoothness and predictability of reported earnings rather than to mislead investors. Originality/value – This paper provides an alternative explanation to the finding of negative discretionary accruals before share repurchases. It adds to the literature on repurchases and earnings smoothing by showing that firms use earnings management around share repurchases to smooth earnings.

Purpose The purpose of this paper is to investigate whether family firms (FFs) differ from non-family firms (NFFs) in their propensity and likelihood of repurchasing shares. It focuses on the effects of voting control and managerial control of family members and economic conditions on repurchasing activity. Design/methodology/approach This paper employs pooled Tobit and probit models for a sample of 982 US firms for the period 2006 through 2015 and separates the roles of voting control and managerial control on influencing share repurchase decisions. Findings This paper provides evidence that FFs have a decreased propensity to repurchase shares relative to NFFs over the sample period. In general, the decreased propensity to repurchase shares is driven by the decision whether to repurchase shares and not the percentage of outstanding market value of equity repurchased. Practical implications For critics of share repurchases, this paper provides support for existing literature that FFs provide good long-term stewardship to their firms. In general, it demonstrates that FFs are less likely to repurchase shares than NFFs. Investors that have a preference for or against repurchases can use this information to improve their security selection process. Originality/value To date, the effects of family voting and managerial control on share repurchases in the USA has not been considered in the finance literature. This paper adds to the literature by providing evidence that family influence generally results in a lower propensity to repurchase shares.

Objective - This study investigates whether private information newly incorporated into stock price enhances performance in timing share repurchases. Methodology/Technique - Cost saving gained in share repurchases is used a proxy for performance of market-timing in share repurchases and firm-specific stock return variation is used to gauge stock price informativeness. A sample of 334 U.S. repurchasing firms are tested using panel data regression. Findings - The paper concludes that managers possess better market timing skill by obtaining more cost saving from their share repurchases when private information is reflected in stock price. Stock price informativeness may be the tool for managers to improve their market timing skill to take advantage of the stock market. Furthermore, firms with smaller size and a higher market-to-book ratios, and firms with higher cash-to-assets ratios are found to achieve more cost saving in buying back their shares indicating that these firms are able to time the market in share repurchasing. Novelty – Despite numerous previous studies focusing solely on using share repurchases announcement for computing cumulative abnormal returns in testing managerial market timing, this study contributes to the literature in several ways: (i) providing evidence relating stock price informativeness and performance of market-timing in share repurchases; (ii) developing a better timing measure constructed using actual repurchasing data; (iii) adopting a cost saving measure as the timing measure instead of cumulative abnormal return. Type of Paper - Empirical. Keywords: Managerial Learning Hypothesis; Market Timing; Stock Repurchase; Stock Price Informativeness; Firm-specific Stock Return Variation. JEL Classification: G12, G13, G14. DOI: https://doi.org/10.35609/jfbr.2019.4.1(5)

PurposeThe purpose of this paper is to examine the short-term and long-term wealth effects of two share repurchase motivations.Design/methodology/approachThe authors use a multi-period numerical model and a Monte Carlo simulation. The Monte Carlo simulation introduces uncertainty into firms’ market values and eliminates some restrictions used in the numerical model.FindingsIn the long term, firms that refrain from repurchasing overvalued shares outperform otherwise identical firms that do not exhibit such restraint. In the short term, firms that repurchase overvalued shares can outperform firms that refrain from such repurchases. Total returns are a function of misvaluation, the firm’s repurchase decision, the rate of return on invested cash and how long the shares remain misvalued. Share price volatility can influence share repurchase decisions.Research limitations/implicationsThe models are incapable of fully modeling the complexities of a dynamic economic environment.Practical implicationsManagers and investors need to be aware of the short-term and long-term effects of share repurchases. Additionally, investors can gain insight into a firm’s share repurchase motivation by observing its cash balances over time.Social implicationsShare repurchases are a zero-sum game with potentially different short-term and long-term wealth effects.Originality/valueWhen studying the wealth effects of share repurchases, it is important to consider the motivations for repurchasing shares as well as the short-term and long-term effects.

This study examines the market reactions to share repurchase announcements made by companies listed on the Johannesburg Stock Exchange from 2003 to 2012. We use an event study methodology and the Capital Asset Pricing Model to determine if there is an announcement effect when a share repurchase announcement is made. Our analysis show that consistent with signalling theory and the announcement effect, share repurchase announcements are associated with positive abnormal returns. The average abnormal return and cumulative average abnormal return noted was 0.46% and 3.81% respectively for the event period (t -20, t +20). There was an observable trend of declining share prices before the share repurchase announcement however the decline in the shares prices was not significant. We found some evidence of market timing ability in 2005 and 2010 however as a collective, we found no significant difference in timing a share repurchase announcement.
Dissertation (MBA)--University of Pretoria, 2012.
Gordon Institute of Business Science (GIBS)
unrestricted

博士
國立中央大學
財務金融研究所
99
Share repurchases have been an intensely studied topic in finance literature. When a firm announces its buyback plan, it will change the firm’s information environment. Informed and uninformed investors are likely to adjust their investment decision. The risk of information trading around share repurchases may be different. Moreover, the information effect of share repurchase is not only on the repurchasing firm but also likely to spill over other firms along supply chain. Thus, this dissertation investigates the two issues and contributes to deeper understand the implication of open market share repurchases. In the first essay, we examine the information trading around open market share repurchases. Our results show that the risk of information trading significantly increases during the repurchase execution period and reverts back in the post-expiration period. It is likely that some uninformed traders leave the market in the execution period, in anticipation of higher information uncertainties. Therefore, the remaining uninformed traders collectively face higher possibility of trading with informed traders. In the second essay, we investigate the wealth effect of open market share repurchases on suppliers. The results show that suppliers have significantly negative short-run abnormal return. It is likely that, when suppliers perceive repurchasing firms’ profitability decline, they adjust their investment to avoid disadvantage. It is more consistent with free cash flow hypothesis. Moreover, we find that the relationship between repurchasing firms and their suppliers have impact on suppliers.

by Ng Kwok-Kwai.
Thesis (M.B.A.)--Chinese University of Hong Kong, 1998.
Includes bibliographical references (leaves 100-101).
ABSTRACT --- p.ii
TABLE OF CONTENTS --- p.iii
LIST OF ILLUSTRATIONS --- p.v
LIST OF TABLES --- p.vi
PREFACE --- p.vii
ACKNOWLEDGEMENTS --- p.ix
Chapter
Chapter I. --- INTRODUCTION --- p.1
Share Repurchase Activities in Hong Kong - Historical Statistics --- p.1
Types of Share Repurchase --- p.7
Chapter II. --- LITERATURE REVIEW --- p.9
Empirical Study on Abnormal Return --- p.9
Motivation for Open Market Share Repurchase --- p.10
Signalling Hypothesis --- p.10
Dividend Taxation Hypothesis --- p.10
Leverage Hypothesis --- p.10
Bondholder Expropriation Hypothesis --- p.10
Scope of this Study --- p.12
Chapter III. --- DATA --- p.13
Sources --- p.13
Sampling Period --- p.13
Screening/Sample Size --- p.14
Chapter IV. --- METHODOLOGY --- p.15
Announcement Day --- p.15
Time Horizons --- p.16
Price Performance --- p.17
Abnormal Return --- p.17
Cumulative Abnormal Return --- p.18
Definition of Variables and Formulae --- p.19
Variables --- p.19
Formulae --- p.20
Computation Process --- p.20
Stage I - Evaluation of Cumulative Abnormal Return(CAR) --- p.20
Abnormal return - beta adjustment --- p.20
Cumulative abnormal return --- p.21
Stage II - CAR verse other Variables --- p.21
Other variables --- p.21
Sub-sample classification --- p.22
Stage III - Regression of CAR with other Variables --- p.23
Chapter V. --- RESULTS AND IMPLICATIONS --- p.24
Cumulative Abnormal Return --- p.24
Short Term Performance --- p.24
Long Term Performance --- p.24
"Cumulative Abnormal Return verse Market-to-Book Ratio, Market Value and Monthly Frequency" --- p.28
Short Term Performance --- p.28
Market-to-book ratio --- p.28
Market value --- p.34
Monthly frequency --- p.39
Long Term Performance --- p.44
Market-to-book ratio --- p.44
Market value --- p.50
Monthly frequency --- p.55
"Regression of CAR verse Market-to-Book Ratio, Market Value and Monthly Frequency" --- p.61
Short Term --- p.61
Long Term --- p.62
Chapter VI. --- CONCLUSION --- p.63
Summary --- p.63
Recommendation --- p.64
APPENDIX I --- p.66
APPENDIX II --- p.70
APPENDIX III --- p.72
APPENDIX IV --- p.96
BIBLIOGRAPHY --- p.100

A 50% dissertation presented in partial fulfilment of the requirements for the degree of Master of Commerce at the University of Witwatersrand.
Information asymmetry creates a gap between management’s perception of the firm’s value and the market value of the firm. It is thought that management engage in information signalling activities in order to close the gap created by information asymmetry. There is a need to understand why management engage in their chosen transactions as this will provide investors with insight into market activities, as well as allow for more accurate investment strategies. While research is available on the market’s reactions to signalling events, the problem is whether management’s intentions have been correctly interpreted by the market. The starting point to gaining this understanding is to ask the question: What signals do management send when they issue and repurchase shares? This study attempts to answer this question by investigating whether companies listed on the Johannesburg Stock Exchange (JSE) issue shares because management perceive their market values to be overvalued and repurchase shares because their market values are undervalued. For the period 1 January 2003 to 31 December 2012, a total of 295 share issue announcements are considered for 102 companies; and a total of 183 share repurchase announcements are considered for 83 companies. The results of this study reveal that managerial equity market timing may exist in the presence of excess returns, where management are better able to predict returns in advance than the market. However, there is also evidence suggesting share repurchases are made to return excess cash to shareholders and issues and repurchases decisions are linked to capital structure planning. The fact that there are other potential reasons for share issues and repurchases, means that the market must be able to determine what the real intentions of management are when shares are issued and repurchased; and hence determine whether their intentions suggest equity market mispricing.

碩士
國立中正大學
財務金融所
98
The goal of this study is to explore the influence of overconfident CEOs on share repurchases from behavioral finance perspectives. We test CEOs overconfidence in three ways：late option exercise, investment in their company and press portrayal. The findings of this study showed that the relationship between overconfident CEOs and the frequency of share repurchases’ announcements was significant positive. This means that there was higher frequency of share repurchases’ announcements when the CEOs were more overconfident. Further, in cash-rich firm, CEOs overconfidence was an important factor of the frequency of share repurchases’ announcements. Finally, abnormal returns of share repurchases’ announcements made by overconfident CEOs was significant lower than those made by rational CEOs. In short , this study found that if the CEOs had shown their overconfidence in the media report, the completion rate of repurchase program was higher.

This dissertation investigates on-market repurchase programs conducted in Australia and explores whether conditions of transparency in the Australian environment are conducive to firms wishing to signal undervaluation of their shares. A sample consisting of 789 programs that are announced over the period 2000 – 2010 are identified and information contained in relevant repurchase disclosures to the market, including program announcements, completion notices and daily trading notices are hand collected for investigation. In this study I examine the share price reaction around the period of a program announcement and the subsequent completion of a program as well as the number of shares repurchased. Share returns are examined by employing an event study methodology and the determinants of the share reaction is established using multiple regression analysis. Tobit regression analysis is employed to investigate the determinants of program completion rates. Results demonstrate that program announcements are accompanied by positive abnormal returns and announcement returns are greater for ‘initial’ programs than for ‘repeat’ programs. Of interest, firms which indicate an unlimited duration earn a greater market response to announcements than firms indicating a fixed period duration. Examination of program completions reveal that completion notices are not accompanied by returns significantly different from zero, a result that is consistent with the notion that they do not impart new information to the market. Examination of announcements demonstrate that the fraction of shares sought or repurchased in a program is not a determinant of announcement returns and firms do not earn a repurchase reputation from prior programs. This finding undermines the importance of program size as a potential cost of false signalling in the Australian environment. Instead, I find evidence that program duration is used by the market as a signal of firm quality. Results demonstrate a negative association between announcement returns and intended program length, consistent with the notion that the shorter the period of time a firm intends to execute a program the more credible a signal to the market that its shares are undervalued. Investigation of completion rates demonstrate that firms are more likely to achieve their repurchase targets if a shorter program length is indicated in an announcement and also the sooner a program is terminated ahead of time. Evidence shows that completion rates are increasing with the range in price a firm pays for its shares and is consistent with the notion that firms repurchase shares out of management’s disagreement with the market over the valuation of its shares rather than to arrest falling share prices. A concern that is often raised in connection with on-market repurchases is that stocks with volatile share prices are particularly suited to firms wishing to acquire shares at ‘cheap’ prices to the benefit of non-selling shareholders, however I find that the transparency of on-market repurchase programs conducted in Australia are effective in deterring firms from engaging in opportunistic behaviour.
Thesis (Ph.D.) -- University of Adelaide, Business School, 2015.

碩士
淡江大學
經濟學系碩士班
96
An open-market share repurchase system has been in operation in Taiwan since August of 2000. In this study, the effect on stock returns of 1185 share repurchase announcements in Taiwan was empirically examined. The results indicate that the free cash-flow hypothesis is able to explain those effects, particularly for low-growth companies. Moreover, companies with a higher buy-back ratio, higher free cash-flow, or lower market-to-book ratio, exhibit greater cumulative abnormal returns from repurchase announcements.

碩士
朝陽科技大學
財務金融系碩士班
90
Abstract Recently, companies listed on Taiwan Stock Exchange are allowed to repurchase their own shares from the open market as a means to maintain the so-called “reasonable” share price. The present study is motivated to reexamine both the more often mentioned “announcement effect” and the less often mentioned “execution effect”. Following the standard event-study methodology, the major empirical findings can be summarized as follows: 1.The cumulative abnormal return in stock price following the announcement date until 2 days after announcement is 2.97%. As for the cumulative abnormal return in stock price covering a 50 days period after announcement date is 10.19%. Based on the above reported findings, the notion that an announcement to repurchase own shares can exert favorable influences on share price has gained empirical support. 2.When sample firms are divided into “higher announced repurchase ratio” and “lower announced repurchase ratio” groups, it is found that the former group as expected has registered a higher cumulative abnormal return in share price when compared with the latter group. 3.When sample firms are divided into two mutually exclusive groups, namely, “first-time” vs. “non-first-time” repurchasing firms, it is found that the positive cumulative abnormal return in share price, of the former group as expected are relatively larger when compared with the latter group. 4.Contrary to expectation, the sample firms with relatively higher execution ratio (defined as the actual repurchase share over the announced repurchase shares) do not register higher cumulative abnormal return when compared with the sample firm with relatively lower execution ratio. 5.Upon the expiry day of the execution period, the following empirical patterns emerge: for the sample firms which did not execute the stock repurchase program at all, the shares declines continuously on and after the day of expiry; in contrast, the sample firms which execute fully the stock repurchase program, the share price decline temporarily following the expiry day then register a continuous up-moving trend. In other words, as expected, firms keep their promise and buy-out the announced repurchase shares has attracted a much more favorable market response. All considered, empirical findings on the large fall conformity with expectations.

碩士
元智大學
會計學系
96
This study examines firms’ financial condition when they announce repurchase their share outstanding by fundamental analysis. I try to find an indicator that can distinguish accounting equality of firms and measure the reliability of information conveyed by repurchase programs. When announcing repurchase, manager frequently indicates that they are doing so in response to mispricing, or their stock price is on undervaluation. Several theoretical papers have investigated the notion that repurchases are a potential signaling to the market. However, this study finds that the announcement return of repurchase firms with poor fundamentals is higher than that of repurchase firms with good fundamental. To be explained by this point, repurchase firms with poor fundamentals are more likely to be undervalued. Accordingly, investors who have difficulty to distinguish the quality of the firm could value the stock by using the signaling of the repurchase program. In addition, my result might be influenced by firm size. Smaller firms communicate to investors for information that could be regarded as a factor of information asymmetry, and smaller firms might have poor fundamental. These results will be consistent with the signaling hypothesis in explaining the motive of the share repurchase.

Sustained investment in productive capabilities and fixed-capital formation is a key driver of inclusive and sustainable structural transformation. Both historically and compared to other middle-income countries, South Africa has performed poorly in terms of sustaining domestic-productive investments. This failing has coexisted with the development of a stock market with the second-highest level of capitalization over gross domestic product (GDP) in the world, and high levels of profitability across several economic sectors. This chapter provides new evidence on the specific ways in which financialization of non-financial corporations in South Africa has resulted in low investment performances, focusing on two large, publicly listed corporations operating across different economic sectors between 2000 and 2019. The analysis shows that, despite sector heterogeneities: (1) corporations have increasingly financed operations, capital expenditure, and distributions to shareholders with debt; (2) the US dollar-denominated share of this debt has grown rapidly, exposing corporations to increased exchange and interest rate risk; and (3) distributions to shareholders, driven by dividends rather than share repurchases, have risen markedly. These financialization dynamics are attributed to the distribution of power in the domestic political economy and the subordinate nature of South Africa’s integration with global finance. Driving financialization, these two mutually reinforcing factors have undermined the translation of profits into domestic investment, reducing its capacity to drive structural transformation.

“Sustainable prosperity” denotes an economy that generates stable and equitable growth for a large and growing middle class. From the 1940s into the 1970s, the United States appeared to be on a trajectory of sustainable prosperity, especially for white-male members of the U.S. labor force. Since the 1980s, however, an increasing proportion of the U.S labor force has experienced unstable employment and inequitable income, while growing numbers of the business firms upon which they rely for employment have generated anemic productivity growth. Stable and equitable growth requires innovative enterprise. The essence of innovative enterprise is investment in productive capabilities that can generate higher-quality, lower-cost goods and services than those previously available. The innovative enterprise tends to be a business firm—a unit of strategic control that, by selling products, must make profits over time to survive. In a modern society, however, business firms are not alone in making investments in the productive capabilities required to generate innovative goods and services. Household units and government agencies also make investments in productive capabilities upon which business firms rely for their own investment activities. When they work in a harmonious fashion, these three types of organizations—household units, government agencies, and business firms—constitute “the investment triad.” The Biden administration’s Build Back Better agenda to restore sustainable prosperity in the United States focuses on investment in productive capabilities by two of the three types of organizations in the triad: government agencies, implementing the Infrastructure Investment and Jobs Act, and household units, implementing the yet-to-be-passed American Families Act. Absent, however, is a policy agenda to encourage and enable investment in innovation by business firms. This gaping lacuna is particularly problematic because many of the largest industrial corporations in the United States place a far higher priority on distributing the contents of the corporate treasury to shareholders in the form of cash dividends and stock buybacks for the sake of higher stock yields than on investing in the productive capabilities of their workforces for the sake of innovation. Based on analyzes of the “financialization” of major U.S. business corporations, I argue that, unless Build Back Better includes an effective policy agenda to encourage and enable corporate investment in innovation, the Biden administration’s program for attaining stable and equitable growth will fail. Drawing on the experience of the U.S. economy over the past seven decades, I summarize how the United States moved toward stable and equitable growth from the late 1940s through the 1970s under a “retain-and-reinvest” resource-allocation regime at major U.S. business firms. Companies retained a substantial portion of their profits to reinvest in productive capabilities, including those of career employees. In contrast, since the early 1980s, under a “downsize-and-distribute” corporate resource-allocation regime, unstable employment, inequitable income, and sagging productivity have characterized the U.S. economy. In transition from retain-and-reinvest to downsize-and-distribute, many of the largest, most powerful corporations have adopted a “dominate-and-distribute” resource-allocation regime: Based on the innovative capabilities that they have previously developed, these companies dominate market segments of their industries but prioritize shareholders in corporate resource allocation. The practice of open-market share repurchases—aka stock buybacks—at major U.S. business corporations has been central to the dominate-and-distribute and downsize-and-distribute regimes. Since the mid-1980s, stock buybacks have become the prime mode for the legalized looting of the business corporation. I call this looting process “predatory value extraction” and contend that it is the fundamental cause of the increasing concentration of income among the richest household units and the erosion of middle-class employment opportunities for most other Americans. I conclude the paper by outlining a policy framework that could stop the looting of the business corporation and put in place social institutions that support sustainable prosperity. The agenda includes a ban on stock buybacks done as open-market repurchases, radical changes in incentives for senior corporate executives, representation of workers and taxpayers as directors on corporate boards, reform of the tax system to reward innovation and penalize financialization, and, guided by the investment-triad framework, government programs to support “collective and cumulative careers” of members of the U.S. labor force. Sustained investment in human capabilities by the investment triad, including business firms, would make it possible for an ever-increasing portion of the U.S. labor force to engage in the productive careers that underpin upward socioeconomic mobility, which would be manifested by a growing, robust, and hopeful American middle class.