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In the twelve months ending September 2025, S&P 500 companies spent a record $1.02 trillion repurchasing their own shares—the second time in history that annual buyback expenditure surpassed the trillion-dollar threshold, and a figure that exceeded the prior twelve-month period by more than eleven percent.¹ By early 2026, authorizations for new repurchase programs were on pace to reach $1.2 trillion for the calendar year, a figure that would represent yet another record.² Across the index, 387 companies executed at least some repurchase activity during the third quarter of 2025 alone, and the top twenty repurchasers alone accounted for 49.5 percent of total buyback spending—well above the pre-pandemic historical average of 44.5 percent.¹
These numbers are staggering in isolation. They become alarming when placed alongside a quieter set of figures that rarely appears in the same analyst report. For the S&P 500 as a whole, revenue growth averaged approximately 8.8 percent in 2025. Earnings-per-share growth averaged approximately 14.2 percent. The gap—roughly two to four percentage points of the index's total EPS growth—was not generated by operational improvement, margin expansion, or new product launches. It was manufactured through arithmetic: the same earnings divided by fewer shares.²
For institutional investors, the question is not whether share repurchases are legitimate tools of capital allocation. They can be. The question is whether the current scale, opacity, and incentive structure surrounding buybacks have transformed them into the most consequential—and least forensically scrutinized—form of earnings management in American corporate finance. The evidence, examined from accounting, regulatory, and governance perspectives, suggests that they have.
The regulatory environment surrounding buyback disclosure is, at present, weaker than it has been in over a decade—and weaker than the Securities and Exchange Commission intended it to be.
In May 2023, the SEC adopted the Share Repurchase Disclosure Modernization rule, which would have required public companies to disclose daily repurchase activity on a quarterly basis, filed as an exhibit to periodic reports.³ The rule also would have required narrative disclosure of the rationale behind repurchase programs and a checkbox indicating whether any director or officer had traded in the company's securities within four business days before or after a buyback announcement.³ Critically, the daily quantitative data was designated as "filed" rather than "furnished," meaning companies would have been subject to liability for misleading statements under Section 18 of the Exchange Act.⁴
None of this came to pass. In December 2023, the United States Court of Appeals for the Fifth Circuit vacated the rule in its entirety after concluding that the SEC had failed to conduct an adequate cost-benefit analysis.⁵ The Commission did not appeal. Disclosure requirements reverted to those in effect prior to the rule's adoption—specifically, the pre-existing Item 703 of Regulation S-K, which requires only aggregate monthly repurchase data disclosed quarterly, with no daily granularity, no mandated narrative explanation of the program's purpose, and no insider trading checkbox.⁶
The result is a disclosure framework designed for a market in which buybacks were a fraction of their current scale. Under the existing rules, an institutional investor examining a company's repurchase activity cannot determine on which specific days shares were repurchased, at what prices, or in what relationship to earnings announcements, analyst forecast deadlines, or insider trading windows. This information asymmetry is not incidental. It is structural—and it is precisely the asymmetry that enables the most problematic uses of repurchase programs to persist undetected.
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The academic literature on the relationship between share repurchases and earnings management is extensive, methodologically rigorous, and remarkably consistent in its conclusions.
The foundational study in this area was published by Hribar, Jenkins, and Johnson in the Journal of Accounting and Economics in 2006. The authors documented that a significant number of public companies use share repurchases to increase reported EPS precisely when the company would otherwise have fallen short of analyst consensus forecasts.⁷ The pattern was not subtle. Companies whose pre-repurchase EPS fell just below the consensus estimate were dramatically more likely to execute buybacks than companies whose pre-repurchase EPS fell just above it—a discontinuity that is difficult to explain by any motive other than deliberate earnings management.⁷
A decade later, Almeida, Fos, and Kronlund extended this analysis in the Journal of Financial Economics, employing a regression discontinuity design that provided causal—not merely correlational—evidence.⁸ Their findings confirmed that the probability of accretive share repurchases is sharply higher for firms that would have narrowly missed EPS forecasts absent the buyback. More consequentially, the authors demonstrated that these EPS-motivated repurchases are associated with subsequent reductions in employment and investment, and a decrease in cash holdings—evidence that managers are willing to sacrifice real economic activity to achieve a headline earnings number.⁸
Survey evidence corroborates the pattern. In the landmark Brav, Graham, Harvey, and Michaely survey of corporate financial officers, published in the Journal of Financial Economics in 2005, improving earnings per share was cited as one of the most frequently mentioned motivations for executing share repurchases.⁹ A subsequent study by Cheng, Harford, and Zhang found that when a CEO's bonus compensation is tied to EPS thresholds, companies are significantly more likely to repurchase shares—and that the likelihood spikes to 75 percent when the company's pre-buyback EPS falls just below the bonus trigger.¹⁰
The cumulative weight of this research establishes a clear pattern. Share repurchases are not merely a capital return mechanism. For a meaningful subset of public companies, they function as a tool for managing the denominator of earnings per share in ways that inflate reported performance, trigger executive compensation payouts, and obscure the underlying trajectory of the business.
The incentive structure connecting buybacks to executive pay is not a theoretical concern. It is an architectural feature of modern compensation design—and one that creates a conflict of interest that institutional investors have been slow to address.
The majority of S&P 500 executive compensation packages include performance-based components tied to EPS growth, revenue growth, or total shareholder return. Of these, EPS-based metrics are among the most prevalent. When a company repurchases shares, the denominator of the EPS calculation contracts. If the earnings numerator remains constant—or even declines modestly—the resulting EPS figure can still increase, potentially triggering performance-based compensation awards that would not have been earned on the basis of actual operational improvement.
The dynamic is circular. The board authorizes a repurchase program. Management executes it, often with discretion over timing and volume. The share count declines. EPS rises. Compensation targets are met. The executives who authorized and timed the buybacks are the same executives whose pay depends on the EPS figures those buybacks inflated. And under the current disclosure regime—which, as discussed above, provides only aggregate monthly data with no daily granularity and no mandated narrative rationale—the precise relationship between buyback timing and compensation trigger dates is invisible to outside investors.
This is not a hypothetical risk. It is the mechanism that the SEC's vacated disclosure rules were specifically designed to make transparent. The insider trading checkbox that would have been required under the 2023 rule—indicating whether any director or officer traded within four business days before or after a buyback announcement—was included precisely because the Commission recognized the potential for self-dealing at the intersection of repurchase activity and executive compensation.³ That transparency was struck down by a court evaluating the adequacy of a cost-benefit analysis, not the substance of the disclosure concern. The concern itself remains entirely unresolved.
The consequences of EPS-motivated buybacks extend well beyond the income statement. The Almeida, Fos, and Kronlund study documented that firms engaging in EPS-driven repurchases subsequently reduced investment in research and development, cut capital expenditure, and decreased employment.⁸ These are not accounting artifacts. They are real reductions in the productive capacity of the enterprise—resources that were directed toward financial engineering rather than operational improvement.
At the current scale of buyback activity, the aggregate effect is material. When S&P 500 companies collectively spend over $1 trillion per year repurchasing shares—more than many of those same companies spend on combined capital expenditure and research and development—the capital allocation question transcends individual firm analysis. It becomes a systemic question about whether the public equity markets are facilitating the efficient deployment of capital or subsidizing the redistribution of cash flows from productive investment to share-count reduction.
The concentration of buyback activity amplifies this concern. With the top twenty repurchasers accounting for nearly half of all S&P 500 buyback spending, the companies deploying the most capital toward share repurchases are often the largest, most influential firms in the index—companies whose investment decisions ripple across supply chains, labor markets, and entire industries.¹ When those firms choose share repurchases over investment, the downstream effects are not confined to their own balance sheets.
At Buxton Helmsley, our forensic approach to financial statement analysis has consistently emphasized that the most consequential risks are found in the gap between what companies report and what the data, properly analyzed, reveals. Share repurchases present exactly this kind of gap—and the forensic indicators for identifying problematic buyback behavior are both accessible and underutilized.
The first indicator is the relationship between EPS growth and revenue growth. When a company reports EPS growth that materially exceeds revenue growth over multiple consecutive quarters, the forensic investor should isolate the contribution of share-count reduction. A company growing EPS at twelve percent while growing revenue at four percent is not necessarily a company with expanding margins. It may be a company buying its way to a headline number. The critical test is whether operating income growth, measured on a per-share and an absolute basis, tells a consistent story.
The second indicator involves the timing of repurchase activity relative to earnings announcements. While the current disclosure regime does not provide daily data, the forensic investor can construct approximations using quarterly cash flow statements, balance sheet changes in treasury stock, and the weighted-average share counts reported in each period. A company that executes a disproportionate share of its annual buyback activity in the final weeks of a quarter—particularly a quarter in which it narrowly met or beat consensus estimates—warrants further investigation.
The third indicator is the relationship between buyback spending and capital expenditure trends. A company that is simultaneously increasing buyback authorizations while reducing or flatlining capital expenditure and R&D spending is making a revealed preference for financial engineering over productive investment. The forensic investor should compare the ratio of buyback spending to combined capex and R&D over a rolling three-to-five-year period and assess whether the trajectory is consistent with the company's stated growth strategy.
The fourth indicator is the structure of executive compensation. Proxy statements disclose the metrics governing performance-based pay. When those metrics include EPS or EPS growth targets, and the company is simultaneously executing a material repurchase program, the institutional investor should model what the CEO's compensation would have been in the absence of the buyback-driven share-count reduction. If the repurchase made the difference between meeting and missing the compensation threshold, the governance implications are serious and the board's capital allocation oversight should be questioned directly.
The fifth indicator is debt-funded repurchases. A company that issues debt to finance share buybacks is not returning excess cash to shareholders. It is leveraging the balance sheet to reduce the share count—a transaction that increases financial risk, inflates EPS, and may trigger performance-based compensation, all while creating no operational value. The forensic investor should flag any company whose net debt has increased materially over a period during which it has also executed significant repurchase activity.
Share repurchases are, at their core, a legitimate mechanism of capital return. A company with genuine excess cash, limited reinvestment opportunities, and a stock price that management believes is undervalued has every reason to repurchase shares—and shareholders benefit when it does so prudently.
But the current environment is not characterized by prudence. It is characterized by record-setting volumes, an inadequate disclosure framework that the courts struck down before it could take effect, executive compensation structures that reward share-count reduction regardless of operational performance, and an academic evidence base that documents a clear and persistent pattern of managers sacrificing real investment for manufactured EPS growth.
For institutional investors, the implication is not that buybacks should be opposed categorically. It is that they should be analyzed forensically—with the same rigor and skepticism that would be applied to any other form of earnings management. The companies using repurchases to return genuine excess capital will withstand that scrutiny. The companies using them to manufacture earnings, trigger executive bonuses, and mask deteriorating fundamentals will not.
The trillion-dollar question is which category a given company falls into. At the current scale of buyback activity, institutional investors cannot afford to assume the answer. They must do the work to find it.
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Referenced Sources
[1] S&P Dow Jones Indices, "S&P 500 Q3 2025 Buybacks Post Modest 6.2% Gain to $249.0 Billion After Declining 20.1% Amidst Uncertainty in Q2; Q4 2025 Expenditures Expected to Post Similar Growth, As 2025 Anticipates a Record $1 Trillion" (December 18, 2025). For the 12-month period ending September 2025, buybacks totaled a record $1.020 trillion, up from $918.4 billion in the prior 12-month period. The top 20 S&P 500 companies accounted for 49.5% of Q3 2025 buybacks, above the pre-COVID historical average of 44.5%. A total of 387 companies executed at least some repurchase activity during Q3 2025.
[2] MarketMinute / Financial Content, "The $1.2 Trillion Wall: Corporate America Deploys Record Buybacks to Counter 2026 Market Volatility" (March 12, 2026), reporting that S&P 500 corporations were on track to authorize $1.2 trillion in share repurchases in 2026, and noting that approximately 2–4% of the S&P 500's total EPS growth was being "manufactured" through share count reduction, with revenue growth averaging approximately 8.8% versus EPS growth averaging approximately 14.2%.
[3] U.S. Securities and Exchange Commission, "SEC Adopts Amendments to Modernize Share Repurchase Disclosure," Press Release No. 2023-85 (May 3, 2023). The final rule required issuers to provide daily repurchase activity on a quarterly basis, disclose the rationale for repurchase programs, and include a checkbox indicating whether any director or Section 16 officer traded within four business days before or after the announcement of a repurchase plan.
[4] Mayer Brown LLP, "SEC Adopts New Share Repurchase Disclosure Rules" (May 8, 2023), noting that the daily quantitative repurchase data would be "filed" rather than "furnished," subjecting issuers to liability under Section 18 of the Exchange Act and incorporation by reference into Securities Act filings subject to Section 11 liability.
[5] Torys LLP, "U.S. Court Vacates SEC's New Share Buyback Disclosure Rules" (January 2024), discussing Chamber of Commerce of the USA v. SEC, No. 23-60255 (5th Cir. Dec. 19, 2023). The Fifth Circuit concluded that the SEC had not conducted an adequate quantitative analysis of the economic impact of the rules. The SEC did not cure the defects by the court's November 30, 2023 deadline, and the rules were vacated in their entirety on December 19, 2023.
[6] U.S. Securities and Exchange Commission, Division of Corporation Finance, "Further Announcement Regarding Share Repurchase Disclosure Modernization Rule" (February 2024), confirming that as a result of the vacatur, disclosure requirements reverted to those in effect prior to the final rule's effective date, specifically the pre-existing Item 703 of Regulation S-K.
[7] Hribar, P., Jenkins, N.T., and Johnson, W.B., "Stock Repurchases as an Earnings Management Device," Journal of Accounting and Economics, Vol. 41, Nos. 1–2 (2006), pp. 3–27. The study documented that companies use share buybacks to increase EPS precisely when the company would otherwise have failed to meet analyst consensus forecasts.
[8] Almeida, H., Fos, V., and Kronlund, M., "The Real Effects of Share Repurchases," Journal of Financial Economics, Vol. 119, No. 1 (2016), pp. 168–185. Using a regression discontinuity design, the authors demonstrated that EPS-motivated repurchases are causally associated with subsequent reductions in employment, investment, and cash holdings.
[9] Brav, A., Graham, J.R., Harvey, C.R., and Michaely, R., "Payout Policy in the 21st Century," Journal of Financial Economics, Vol. 77, No. 3 (2005), pp. 483–527. The survey of 384 financial executives found that managers favor repurchases because they are viewed as more flexible than dividends, and that managers like to repurchase shares when they believe the stock is undervalued and in an effort to increase EPS.
[10] Cheng, Y., Harford, J., and Zhang, T., "Bonus-Driven Repurchases," Journal of Financial and Quantitative Analysis, Vol. 50, No. 3 (2015), pp. 447–475. The study found that when a CEO's compensation is tied to EPS thresholds and the company's pre-buyback EPS is close to the bonus trigger, 75% of firm-quarters involve a share repurchase, significantly higher than the 61% observed when EPS is not close to the threshold.
This article is published by Buxton Helmsley USA, Inc. for informational and educational purposes only. It does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. The views expressed are those of Buxton Helmsley and are based on publicly available information as of the date of publication. Investors should conduct their own due diligence and consult with qualified professionals before making investment decisions.
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