Question

What are ethical issues associated with treasury stock?

Answer 1

Following are the ethical issues with treasury stock:-

1. Companies can artificially increase their earning per share even though earning is not increasing in real.

2. Companies usually use it as a tool of earning profit as an insiders transaction because initially there is a jump in price once the buyback is announced. Later on, price correction happens.

3. Critics also say that the amount of money that is used for buying shares should be rather used for investment.

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