Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/335610 
Year of Publication: 
2026
Citation: 
[Journal:] Journal of Asset Management [ISSN:] 1479-179X [Volume:] 27 [Issue:] 1 [Article No.:] 8 [Publisher:] Palgrave Macmillan UK [Place:] London [Year:] 2026
Publisher: 
Palgrave Macmillan UK, London
Abstract: 
We assess what the prevalence of share buybacks can tell us about the relationship between the firm and its stakeholders in an environment in which ownership is increasingly concentrated in the hands of a small number of large asset managers. While the finance literature has put forward several reasons for the current prevalence of buybacks, we posit that without the significant institutional changes outlined in this paper, namely the rise of index investing, these triggers by themselves cannot explain their popularity. We present a game theory model in which three players vie for the cash flow of the company: managers, shareholders, and other stakeholders. We show how in a constellation in which all three players have equal power the expected outcome would be to invest the company’s surplus cash in growth opportunities. This contradicts what is observable in practice: the prevalence of buybacks. We identify ’asset manager capitalism’ as the cause and conclude that changes in the shareholder ownership structure are partly responsible for this. Shareholders have used their increased influence to supervise managers and to shape corporate policy in their favour. This paper adds to the literature on stakeholder theory an understanding of how the relative power of stakeholder groups has changed under asset manager capitalism. We do not, however, seek to take sides in the debate as to whether share buybacks are desirable or not.
Subjects: 
Game theory
Stakeholder theory
Share buybacks
Mutual funds
ETFs
JEL: 
G23
G32
G34
L22
P16
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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