Financial accounting

Articles on Financial Accounting

Joan Farre-Mensa, Roni Michaely & Martin C. Schmalz

Payout policy is at the core of many key questions in corporate finance. In a world in which financial markets are not frictionless, how much firms pay out and which vehicle they choose to distribute cash to their shareholders may affect their valuation, has a potential impact on how much taxes investors pay, may affect management's investment decisions, and may inform the market about how good the firm is relative to its peers. In this paper the authors review the academic literature on payout policy, with a particular emphasis on developments in the past two decades. Scholarship on payout policy has made significant advancements in the last 20 years, and we now know much more about the importance of taxes, agency, and signaling motives for payout policy. Perhaps the most important change in corporate payout policy in the last two decades has been the secular increase of stock repurchases and the apparent triumph of buybacks over dividends as the dominant form of corporate payouts. Looking at the bigger picture, the authors observe that, until recently, most scholarship has analyzed payout policy in isolation. An important recent development in the payout literature has been to consider the interaction between payout and other corporate policies, such as compensation or investment. The fact that payouts are not simply residual free cash flows underlines the importance of taking seriously the interdependence of financing, investment, and payout decisions.

YOU MIGHT ALSO LIKE
MIT OpenCourseWare- Free Financial Accounting course
MIT OpenCourseWare- Free Financial Accounting course ...
Financial Accounting-Horizontal and Vertical Analysis
Financial Accounting-Horizontal and Vertical Analysis
Financial Accounting 7th Edition Chapter 3 Problem 5CP
Financial Accounting 7th Edition Chapter 3 Problem 5CP ...
Share this Post

Related posts

Questions on Financial Accounting

Questions on Financial Accounting

DECEMBER 03, 2024

Are you looking for effective interview questions to ask accounting and finance job applicants? We ve covered the interview…

Read More
Books on Financial Accounting

Books on Financial Accounting

DECEMBER 03, 2024

1. Financial Accounting: An Introduction to Concepts, Methods, and Uses by Clyde P. Stickney, Roman L. Weil, Hardcover: 992…

Read More