One compelling reason why shareholders back share repurchases is that they generally lead to a share price increase. In her dissertation on share repurchases, Nicolene Wesson of the University of Stellenbosch Business School established that a "share repurchase portfolio" outperformed the All Share index by almost 8.4% compounded over 10 years.One of her next projects will look at whether the improved performance was attributable to comparatively stronger profit performances or merely to a re-rating of the share by investors.Such a re-rating would be down to the type of market manipulation hinted at in the memorandum to the objects of the Companies Amendment Bill of 1999 when the Companies Act was changed to allow buybacks.It stated "... allowing a company to acquire its own shares to support the market for its own shares, thus also preserving for its shareholders the value of the shares, is but one advantage" of being able to buy back shares.Share repurchases are seen as a form of financial management, which also happens to involve signalling to the market that key decision makers in a company believe the market is undervaluing the share. The implication is that the market does not work efficiently and needs to be prompted by executives who use company resources to enhance the demand for the shares.The Public Investment Corporation in principle is in favour of buybacks, provided they are done "judiciously and with all shareholders in mind". As a rule, it supports resolutions giving directors the authority to repurchase shares.Karl Leinberger, chief investment officer at Coronation Fund Managers, said: "We generally are very favourably disposed to buybacks in the stocks we own. This is because if we own a stock, we believe it is undervalued. Buying back shares for less than they are worth is value accretive."At Sasol, which repurchased R16-billion worth of shares during Wesson's research period, Christine Ramon, then chief financial officer, said the programme "is one of several options that we're evaluating to restructure Sasol's balance sheet".The notion that shares are only repurchased if they are "undervalued" is problematic given the evidence that most of the buying bythe companies in Wesson's research was done as prices climbed - and price-to-earnings ratings spiked - in the lead-up to the 2008 global crash...