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How does buying back stock affect a company's credit spread? Would it cause it to get smaller? Any clarification would be appreciated.

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isn't that a very individual thing. In my opinion that would depend on the company in general. Or are you looking for some mathematical model ? –  Probilitator Feb 24 at 8:22

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All else being equal, buying back stock would cause a company's credit spread to widen (increase). This is because a share buyback involves shrinking the firm's assets (spending cash to buy back the stock) and shrinking equity/retained earnings, while leaving the liabilities unchanged (or increasing them in the case of a leveraged buy back). This is an increase in leverage, which would leave the firm more exposed in the event of a bankruptcy.

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Worth noting: dividends have the same effect. (Stock buybacks are often considered to be in lieu of dividends since the tax consequences are better). –  Brian B Feb 24 at 19:54
    
+1 for teaching me sth. new ;) –  Probilitator Feb 25 at 6:29

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