Question A:
Large-scale stock buybacks by public corporations provide short-term rewards for shareholders and senior executives at the expense of potentially higher-return corporate investments.
Responses
Responses weighted by each expert's confidence
Question B:
The proposed higher tax on corporate stock buybacks (an increase from 1% to 4%) would generate substantial public revenues.
Responses
Responses weighted by each expert's confidence
Question C:
The proposed higher tax on corporate stock buybacks would generate a substantial increase in corporate investment.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 John Campbell |
Harvard | Bio/Vote History | ||
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It is not true that keeping profits inside corporations is necessarily the highest-value use of those funds. Corporations should pass profits back to shareholders, potentially for investment elsewhere, unless they have unusually attractive investment opportunities.
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 John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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There is little sillier than the current war on buybacks. A company that has no good ideas should return money to shareholders, to reinvest in companies that do. Allowing buybacks was a reform against big inefficient conglomorates & corporate waste! Buyback tax protects them.
-see background information here -see background information here -see background information here |
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 Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Repurchases and dividends allow managers and boards to pay out excess cash. There are some frictions, however. Repurchases increase stock prices as compared to dividends. This affects managerial stock options. Repurchases do not seem to cause misallocation of capital.
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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The empirical evidence is mixed. There are signaling channels that could imply improvements in shareholder performance.
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 Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Xavier Gabaix |
Harvard | Bio/Vote History | ||
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Share buybacks can indeed move the price in inelastic markets. Still, if share buybacks substitute for dividends, that doesn’t affect investment
-see background information here |
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 Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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 John Graham |
Duke Fuqua | Bio/Vote History | ||
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Presumably additional investment companies might do would be "marginal" relative to the investment they already are doing
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 Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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Companies often return money to shareholders (dividends and buybacks) when they lack attractive investments. I think it is naïve to think that all of the money spent on buybacks could have been deployed to high net present value projects.
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 David Hirshleifer |
USC | Bio/Vote History | ||
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Repurchases facilitate efficient allocation of capital from firms with inferior investment opportunities to better uses.
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 Harrison Hong |
Columbia | Bio/Vote History | ||
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Stock buy backs are substitute for dividends. Presumably, companies that are buying back stock see fewer great investment opportunities on the horizon.
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 Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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People have said this since the late 1970s. Not much evidence of negative effects. US Companies have performed extremely well since then.
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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 Ralph Koijen |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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 Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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 Andrew Lo |
MIT Sloan | Did Not Answer | Bio/Vote History | |
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 Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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This would only be the case if managers were foregoing positive NPV projects in order to do buybacks, and if markets perceived this foregoing of positive NPV projects to be value-increasing.
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 Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Depends on whether they have productive investment opportunities or not
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 Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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 Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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 Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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In a competitive market, if buybacks are chosen over investing it is because there are not high NPV projects to invest.
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 Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Repurchases do not artificially boost stock prices in the short-run and they help prevent companies from overinvesting in low-return projects. Capital can then be put to better use elsewhere. (Whether different taxation of repurchases and dividends is good is a different matter)
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 Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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Firms buy back shares to pay funds to shareholders who own the company. If firms could not do this, they could instead pay shareholders with higher dividends. Dividends typically lead to higher taxes and lower post-dividend share prices, but not different corporate investment.
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 Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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It depends on the firms’ investment opportunities
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 Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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large buybacks can be a symptom of monopoly power, in which case investment in real assets is too low
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 Manju Puri |
Duke Fuqua | Bio/Vote History | ||
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If corporations do not have good investment opportunities it makes sense to return money to shareholders.
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 Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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If they had positive NPV investments, they would do them because they are beneficial to stockholders, some of whom are typically management.
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 Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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Buyback are alternatives to dividend payouts. The buyback tax reduces the tax advantage of stock repurchase. If corporations have extra cash, they will distribute it. The policy should be evaluated as a tax policy, not in relation to the impact on investments.
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 Amit Seru |
Stanford GSB | Bio/Vote History | ||
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No evidence to suggest this is the case.
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 Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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 Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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Evidence does not support this statement.
-see background information here -see background information here -see background information here |
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 Jeremy Stein |
Harvard | Bio/Vote History | ||
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 Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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 Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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Before I read the Boissel and Matray 2022 AER paper, I would have disagreed with this statement. But that paper shows convincingly that higher dividend taxes lead to higher investment. It suggests that taxing shareholder payouts boosts investment. Is it "high return?" Who knows?
-see background information here |
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 Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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s
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 Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Corporate managers have short-term incentives to engineer share buybacks since they are natural sellers of shares. Their horizons may be shorter than that of long-run profitable investment. Some shareholders may have similar short-term incentives.
-see background information here |
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 Ingrid M. Werner |
OSU Fisher School | Did Not Answer | Bio/Vote History | |
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 Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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John Campbell |
Harvard | Bio/Vote History | ||
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Taxing buybacks at a higher rate makes them more equivalent to dividends, the alternative means by which corporations pay their shareholders, and thereby closes a tax loophole. While buybacks will be reduced in response, there should nonetheless be significant revenue.
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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When you tax something, people adjust to avoid paying the tax. I expect a lot less buybacks, and consequently little revenue. Also, a mild retardant to economic growth. Buybacks are more efficient than dividends or other ways of giving money to shareholders.
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Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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A 1% to 4% tax rate on past repurchases implies a substantial additional tax revenues. But firms would be discouraged by the tax from buying back as much stock in the future. How much? I am uncertain.
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Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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Then corporations will use dividends rather than share buybacks
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Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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Companies would likely begin to substitute away from repurchases, so increased revenue collection would be modest or possibly even smaller
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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It may generate substantial revenue in the short-term. In the longer term, the higher tax may lead to lower overall revenue. As with any tax, you need to look not just at the benefits (higher revenue for government) but also the costs (lower investment, slower growth, etc.).
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David Hirshleifer |
USC | Bio/Vote History | ||
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Harrison Hong |
Columbia | Bio/Vote History | ||
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A tax on stock buy backs is like a tax on dividends which would lead insiders to substitute toward spending inside the firm
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Companies likely would adjust by reducing buybacks, increasing one-time dividend payments, holding more cash, paying down debt.
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Ralph Koijen |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Andrew Lo |
MIT Sloan | Did Not Answer | Bio/Vote History | |
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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All else equal, the tax would generate substantial public revenues. The question is what behaviors firms will change. Over time, a strong takeaway is that changes in tax code cause changes in corporate behavior.
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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The tax raises the cost of buybacks which could induce firms to invest in low or negative NPV projects which would reduce value.
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Relative to other sources of revenue, the revenue from the tax on buybacks seem quite small.
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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This tax is will raise revenues of 3% of total buybacks and hardly change buyback behavior, so will raise on the order of a few tens of billions of dollars which is a lot of money but not much compared to total tax revenues or what a dividend tax could raise without buybacks.
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Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Firms will adjust how they distribute earnings
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Manju Puri |
Duke Fuqua | Bio/Vote History | ||
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Depends on how corporate actions change in reaction.
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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It is more likely to skew incentives and lead to misallocation of money.
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Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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Corporations will begin to favor cash dividends and reduce buybacks, thus, it will be difficult to estimate the public revenues from the policy. There are probably multiple market considerations that drive the decision, but taxes must be one of them (hard to know how much)
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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It should not be difficult to calculate the expected tax revenues. The amount would be much less than is raised by the corporate income tax which is actually a relatively small portion of the total amount raised in taxes.
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Given the short-termist incentives explained above, a modest tax would reduce but not eliminate share buybacks and hence raise non-trivial tax revenue. Not sure we have a precise estimate of that elasticity in the academic literature. JCT predicts the 1% tax will raise $75 bi
-see background information here |
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Ingrid M. Werner |
OSU Fisher School | Did Not Answer | Bio/Vote History | |
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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John Campbell |
Harvard | Bio/Vote History | ||
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I think a strong investment response is unlikely.
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Many buybacks were undertaken to lever up. That's not great, but has little to do with investment. Companies with poor ideas will just directly buy assets of other companies, rather than give it to investors to do that. So we get the same amount of investment, just directed badly
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Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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How much would this tax on repurchases cause any new available cash to be used for dividends, expenses, or capital investments? There is not only uncertainty about reduction in repurchases, but also how the resulting additional cash is used.
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Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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Then corporations will use dividends rather than share buybacks
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Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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Firms that repurchase shares already largely do all the investment they want to do or have the mgmt/labor capacity to do. Even if they retain funds rather than repurchase, it's not clear they would invest much more (and they may increase dividends and not have extra funds anyway)
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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It is unlikely that this tax will alter investment plans. Companies consider investments all the time. They generally choose the ones that have the best chance of generating value for the company. Will this tax lead them to invest in low or negative NPV investments?-I doubt it.
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David Hirshleifer |
USC | Bio/Vote History | ||
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Harrison Hong |
Columbia | Bio/Vote History | ||
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For the same reason as stated previously.
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Investment decisions are largely their financial attractiveness and organizational capabilities.
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Ralph Koijen |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Andrew Lo |
MIT Sloan | Did Not Answer | Bio/Vote History | |
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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Firms should invest in positive NPV projects. While a change in tax code may have a marginal effect on the NPV of various projects, it should not have a 'substantial' effect.
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Depends on investment opportunities
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
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Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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Yes, if buybacks are a substitute for investment, then raising their cost will increase investment, but that isn't necessarily a good thing.
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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Buybacks are one of many, many ways for firms to use profits that do not involve any change in real corporate investment. Examples include reducing debt, buying or funding other companies, lending funds, paying dividends, or just saving in existing assets or accounts.
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Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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While investment may increase, it may be less productive investment.
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Manju Puri |
Duke Fuqua | Bio/Vote History | ||
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Depends on how and whether corporations change investment behavior in response.
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Unlikely, but if it does it is more likely that that investment is lower quality.
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Paola Sapienza |
Northwestern Kellogg | Bio/Vote History | ||
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I believe that if companies have extra cash, there will distribute it, either through dividends or buyback.
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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Evidence does not support this statement.
-see background information here -see background information here -see background information here |
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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Amir Sufi |
Chicago Booth | Bio/Vote History | ||
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Again, see the Boissel and Matray paper. My prior says that taxing buybacks would not boost investment. That paper has made me doubt my prior.
-see background information here |
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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On the margin, there would be both more dividend payouts and more investment, as some of short-termist distortions are mitigates with the tax. Just how large the effect is is uncertain, but maybe it will help to boost anemic aggregate investment.
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Ingrid M. Werner |
OSU Fisher School | Did Not Answer | Bio/Vote History | |
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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