The clean surplus relation holds if Book_(t+1) = Book_t + Earnings - Dividends
Given that a (all-cash, without borrowing) share repurchases does not affect earnings, but decreases the book value of equity, am I correct in saying that a share repurchase leads to a violation of the clean surplus relationship, or did I get something wrong?
Note that EPS will change given that the number of shares changes with a share repurchase, but total earnings shouldn’t change.