Today, repurchases represent a significant portion of total USA corporate payouts (Figure 1). In the last several years, the dollar amount of repurchases has been virtually equal to that of cash dividends. Not only has the amount of repurchases increased, but also the number of firms that repurchase has increased dramatically.
The phenomenon of the decline in the number of firms that pay dividends [Fama and French (2001), Grullon and Michaely (2002)] might be directly related to the trend we see in repurchases. These trends represent a significant departure from historical patterns in repurchase and dividend policies of corporations.
9.1 The mechanics and some stylized facts
Firms repurchase their shares through three main vehicles: ...