Goldman Sachs challenges the common narrative that corporations prioritize buybacks over investment, arguing that growth spending has consistently dominated cash allocation. The paper highlights that capital expenditures and R&D have exceeded shareholder payouts for decades, pushing back on the idea of financial engineering driving corporate behavior.
Misperceptions surrounding corporate cash spending priorities and the economics of share repurchases
Goldman Sachs
David Kostin
Research
16 Pages
Key Takeaways
Growth Spending Dominates: Investment in capex and R&D has made up over 50% of cash use annually since 1990, exceeding buybacks and dividends combined.
Buyback Misconceptions Persist: Share repurchases averaged roughly 30% of cash deployment, contradicting claims they crowd out investment despite rising scrutiny post-2010.
Cash Flow Allocation Stable: Total shareholder returns and reinvestment have moved together, with S&P 500 firms allocating nearly 90% of cash flow consistently over multiple decades.
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