Understanding Treasury Shares: Implications and Strategies for Corporations

Introduction

The concept of treasury shares—stock that has been repurchased by a corporation and is held in its treasury—plays a significant role in corporate finance and governance. This report aims to explore the implications of treasury shares on corporate strategy and stakeholder value, and to analyze effective approaches for corporations in managing these shares. By examining the motivations behind share repurchases and their potential impacts on financial performance and market perception, this paper seeks to provide a comprehensive understanding of treasury shares and their strategic importance in contemporary corporate practice.

Main Body

Treasury shares are often misunderstood, yet they represent a strategic financial tool that corporations can leverage to achieve various objectives. One principal reason companies engage in share repurchase is to enhance shareholder value. By reducing the number of shares outstanding, a company can increase earnings per share (EPS), thereby potentially boosting its stock price. According to research by H. G. Baker and J. A. Wurgler (2002),