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Business: Investment

Department for Business, Energy and Industrial Strategy written question – answered on 31st October 2019.

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Photo of David Davis David Davis Conservative, Haltemprice and Howden

To ask the Secretary of State for Business, Energy and Industrial Strategy, what assessment she has made of the effect of share-buy-back schemes on business investment.

Photo of Kelly Tolhurst Kelly Tolhurst Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

The Department commissioned research in 2018 to establish whether share buybacks are being misused to hit performance targets, inflate executive pay and reduce business investment. The research was published on 19 July 2019. It found no relationship between share repurchases and investment and no evidence to suggest that buybacks are being used systematically to artificially hit earnings per share (EPS) targets.

The research did, however, reveal that the presence of EPS targets in executive remuneration plans correlates with lower levels of investment. The study said that it would be premature to draw firm conclusions but that the area warranted further research. The Department intends to follow this up and plans to commission further research into whether there is a direct link (rather than through the use of buybacks) between executive pay targets and levels of investment and between performance targets and short-term executive decision-making.

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