Sustainable Capital Allocation

Are US corporates creating value?

Capital allocation is a dynamic process and there is no “rule of thumb” for the right allocation of capital. It is every corporate management’s fiduciary responsibility to allocate capital efficiently to build long-term value for its shareholders.

Is shareholder value being created on a sustainable basis?

Capital allocation decisions made by corporates involve substantial funds. In this study we cover about $2.7 trillion of capital over 10 years of which some 50% was returned to shareholders in the form of either Share buybacks or dividends, whilst some 50% was spent externally in the form of either capex or M&A.

We have analysed the capital allocation decisions of 100 US-based companies over a 10-year period (2008-2017) and found that only 35 created shareholder value, while others either destroyed or made no difference to shareholder value.

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Bhavna Khurana

With more than 11 years of financial and investment research experience, Bhavna is the client solutions architect for the Financial Services practice of The Smart Cube.

In her role, she acts as the relationship manager for key client accounts and is responsible for business development and designing of new financial research products and services for the practice. Bhavna is a certified Chartered Accountant (India) and a CFA charterholder. After spending more than 7 years in The Smart Cube’s Financial Research team in India, Bhavna now leads our financial services client solutions team from Chicago.