1..Do you agree that corporate managers would manipulate their stock’s value prior to a buyback, or do you believe that corporations are more likely to initiate a buyback to enhance shareholder value? When CBS announced in March 2007 that it would buy back $1.4 billion worth of stock, its sagging share price saw the biggest spike since the media giant parted ways with Viacom in 2005. The 4.5 percent jump may have been an omen of good fortune—at the very least, it showed how much shareholders like buybacks.

Companies have been gobbling up their own shares faster than ever in a world of inexpensive capital and swollen balance sheets. Since 2003, the market for buybacks has boomed, with repurchases nearly on a par with capital expenditures. Some, however, have questioned the moves and motives that lead to a big buyback.

In addition to simply returning cash to shareholders, many companies also repurchase stock because they believe that their stock is undervalued. New research, however, shows that companies often use creative financial reporting to push earnings downward before buybacks, making the stock seem undervalued and causing its price to bounce higher after the buyback. That pleases investors who then amplify the effect by pushing the price even higher