Credit Suisse examines how corporate capital allocation decisions shape long term value creation, arguing many CEOs struggle to deploy cash effectively. The paper challenges aggressive growth thinking, noting companies with lower asset growth often outperform while buybacks surpassed dividends for most of the past decade.
Capital Allocation: Evidence, Analytical Methods, and Assessment Guidance
Credit Suisse
Michael Mauboussin, Dan Callahan
Research
73 Pages
Key Takeaways
Internal Funding Dominance: Internal financing supplied nearly 90% of U.S. corporate capital from 1980 to 2013, giving management teams enormous influence over whether shareholder value compounds or erodes.
Buyback Shift Accelerates: Gross buybacks rose from near 0% of sales in 1980 to 4.0% in 2013, overtaking dividends in every year except 2009 during the past decade.
M&A Success Rare: McKinsey found only one third of deals create value, while average deal premiums reached 44% and roughly 58% of acquirers historically overpaid.
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