Stock buybacks are one example of theory not quite holding up to reality. After the Securities & Exchange Commission issued a 1981 ruling which stated that companies will not be held liable for stock manipulation if they engage in repurchases of their own stock. Repurchases of common stock occurred before 1981, but it did not come with the explicit blessing from the SEC that civil and criminal charges for stock price manipulation would not apply.
Since then, there has been a significant debate about whether stock repurchases or significant dividend hikes are in the best interest of the shareholders. In the late 1990s, stock repurchases gained favor in corporate boardrooms, as stock options … Read the rest of this article!