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We empirically investigate dividend and share repurchase policies of Canadian firms. Our analysis contains two features that are uncommon in finance, while they are encountered in other fields of science. First, we use standard, simultaneous and nested logit models. The non-standard logit models are often used in recreational economics and marketing. By examining different model specifications, we test alternative descriptions of the behavior of decision-makers. Second, we use questionnaire data on firm characteristics. Collecting data by questionnaires is hardly ever done in finance, while it is the mainstream approach in sociology and organization. We have sent a questionnaire to the 500 largest non-financial Canadian companies listed on the Toronto Stock Exchange, of which 191 usable responses were returned. Our results are consistent with a structure in which the company first decides whether it wants to pay out cash to its shareholders or not. In the second stage the firm decides on the form of the payout: dividends, share repurchases or both. Payout is determined by free cash flow. The choice for dividends and repurchases depends on behavioral and tax preferences. Furthermore, the payout is less likely to be dividends if the company has executive stock option plans. Finally, we find evidence for the Brennan and Thakor (1990) model. According to this model the existence of asymmetric information amongst outsiders is associated with a preference for dividend payments over share repurchases.

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Using US data from June 1984 to July 1999, we show that the impact of rm-specic characteristics like size and book-to-price on future excess stock returns varies considerably over time. The impact can be either positive or negative at dierent times. This time variation is partially predictable. We i n v estigate whether the partial predictability signals security mispricing or risk compensation by formulating alternative m o deling strategies. The strategies are compared empirically. In particular, we allow for a state-dependent c hoice of investment s t yles rather than a once-and-for-all choice for a particular style, for example based on high book-to-price ratios or small market cap values. Using alternative w a ys to correct for risk, we nd signicant and robust excess returns to style rotating investment strategies. Business cycle oriented approaches exhibit the best overall performance. Purely statistical models for style rotation or xed investment s t yles reveal less robust behavior.