Corporate Payout Policy

By H. DeAngelo, L. DeAngelo, Douglas J. Skinner. Foundations and Trends® in Finance, 2009

354 citations recorded by the source corpus.

We present a synthesis of academic research on corporate payout policy grounded in the pioneering contributions of Lintner (1956) and Miller and Modigliani (1961). We conclude that a simple asymmetric information framework that emphasizes the need to distribute FCF and that embeds agency costs (as in Jensen (1986)) and security valuation problems (as in Myers and Majluf (1984)) does a good job of explaining the main features of observed payout policies — i.e., the massive size of corporate payouts, their timing and, to a lesser degree, their (dividend versus stock repurchase) form. We also conclude that managerial signaling motives, clientele demands, tax deferral benefits, investors’ behavioral heuristics, and investor sentiment have at best minor influences on payout policy, but that behavioral biases at the managerial level (e.g., over-confidence) and the idiosyncratic preferences of controlling stockholders plausibly have a first-order impact.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/578570adc16482f04d0b2ba297f2c842daaaf5d4

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Citations in the corpus

Dividends and economic policy uncertainty: International evidence (2021, neutral): “Similarly, DeAngelo et al. (2009) show that dividends have become more concentrated in fewer firms that pay large dividends. The study of Hoberg and Prabhala (2009) is particularly germane to this debate.”
Product Market Threats, Payouts, and Financial Flexibility (2012, neutral): “Alternatively, DeAngelo, DeAngelo, and Skinner (2009) discuss a life cycle theory with managerial agency in which free cash flow creates a mindset of resource abundance.”
What Do Firms Do When Dividend Tax Rates Change? An Examination of Alternative Payout Responses (2014, neutral): “Driebusch (2010) states, “For executives with large holdings in their company's shares, the [tax induced special] payouts aren't entirely altruistic.”
CEO Power, Government Monitoring, and Bank Dividends (2016, positive): “This ﬁnding is consistent with DeAngelo et al. (2008) who found that taxes may not be ﬁrst-order determinant of the choice be-tween dividends and stock repurchases.”
What do dividends tell us about earnings quality? (2009, neutral): “There is now agreement that the traditional view of signaling—under which managers use dividends to signal future earnings prospects—is not empirically descriptive (Allen and Michaely 2002; Brav et al. 2005; DeAngelo et al. 2008).”