“The phenomenon is the result of several converging forces: pressure from activist shareholders; executive compensation programs that tie pay to per-share earnings and share prices that buybacks can boost; increased global competition; and fear of making long-term bets on products and services that may not pay off.  Companies say buybacks are warranted when demand for their products and services isn’t enough to justify spending on R&D, or when they deem their shares to be undervalued, and therefore a better investment than new projects.  But if those buybacks come at the expense of innovation, short-term gains in shareholder wealth could harm long-term competitiveness.”

http://www.reuters.com/investigates/special-report/usa-buybacks-cannibalized/

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