An economic perspective (model) on US corporations and treasury stock

Treasury stock and firm market value using a modified Tobin's q are modeled by using a firm utility preference function and a quadratic constraint function. The choice of the quadratic form is based on an econometric analysis of the relationship of q to T, the amount of treasury stock held by the firm. US industrial corporations were sampled for the quarterly period from 1969 to 2013. There are 1,041 panels (firms) and some 32,494 overall observations. The statistical results were quite good. The firm's optimum solution resulted in a q that is less than the maximum q given by the inverted U-shaped constraint. I argue that stockholders would prefer the maximum q.