Comment by cratermoon 7 hours ago
Note the "maximize shareholder value" aspect. That's the essential driving force behind business since then: The Friedman doctrine.
Now consider the choices a company makes when executives hold the Friedman doctrine as orthodoxy. Put money into basic research that might generate shareholder value in some unknown time, or buy their own stock back and pump up the price?
Why would companies not want to maximize their value before share buybacks?
Your question is a reflection of just how engrained the Friedman doctrine has become in business. Milton Friedman introduced his theory in 1970, but it really got a boost in the 80s. First in 1981 when President Reagan named him to his Economic Policy Advisory Board and again in 1988, when Reagan gave him the Presidential Medal of Freedom and the National Medal of Science.
There are still many competing theories of business ethics, but the Friedman doctrine is what drives corporations today.
And what other theory is there? The only two I know of are the shareholder theory and the vague "Capitalism bad. Shareholder bad." theory, which isn't actually a theory, but a complaint.
Buying back stock is just as a way to distribute money to shareholders. It's neutral when it comes to "shareholder value". It's the same as paying dividends and having some shareholders reinvest it.
It just saves an extra step and doesn't trigger tax event. It also makes more sense. If you prefer cash you sell it on the market to the company. If you prefer holding shares you don't do anything. You get a choice when it cash out instead of being forced to on regular basis.
Where do you think the capital being returned is going? If it's not being consumed but instead is mostly getting reinvested somewhere else than what is the problem? Capital markets are working as intended to move capital out of a firm that cannot generate high returns with it into ones that can.