The evolving relation between dividends and flexible payouts: A different evolution

Armitage, Seth; Gallagher, Ronan

doi:10.1111/eufm.12288

Cited by 7 publications

(4 citation statements)

References 58 publications

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“…So Kulchania s findings supported Grullon & Michaely substitution hypothesis which was also true in the first decade of the 21st century. Armitage & Gallagher (2020) repurchases substitution hypothesis, among British companies for the period 1993 2017 and they did not find evidence supporting substitution for UK firms in the 21st century (Armitage & Gallagher, 2020, s. 20).…”

Section: Literature Reviewmentioning

confidence: 93%

The Proposal of Corporate Payout Decisions’ Modelling

Kowerski¹,

Kaźmierska-Jóźwiak²

2022

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Decisions on a company’s profit sharing are the most important financial decisions for both the shareholders as a source of additional income and the company as the source of cash outflow. The net profit can be transferred to the shareholders in the form of dividends or stock repurchases. Due to the fact that for both, dividends and share repurchase, the source of payments is the net profit (either last year profit, or retained profit), it can be assumed that decisions regarding dividend payments and share repurchases are interdependent. Therefore, a very important and so far without an unequivocal solution is the problem of measuring the relationship between decisions on dividend payments and share repurchases (whether to pay out a company’s profit in one of the forms, in both forms or at all). Taking into consideration the possibility of interdependence of both forms of corporate payout policy as well as the fact that data describing payout policy are of panel nature and the relationships between the decisions and the determinants may be non-linear, two simultaneous equations second order panel binomial choice model with random specific effects, the parameters of which are estimated in the same way as in the two stage least squares, was suggested for modelling the payout policy. The modelling procedure was verified by the estimation of the model on a balanced panel of 153 companies listed on the Warsaw Stock Exchange over the period 2008–2016 (1,377 observations). The study results show that the proposed procedure enables the selection of appropriate factors determining the decisions on dividends and share repurchases and the assessment of the relationship between them. It takes into the consideration the panel nature of the data and the possibility of heterogeneity and removes the phenomenon of endogeneity in the model, thereby, filling an existing gap in the literature on corporate payout decisions.

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Section: Literature Reviewmentioning

confidence: 93%

The Proposal of Corporate Payout Decisions’ Modelling

Kowerski¹,

Kaźmierska-Jóźwiak²

2022

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“…Additional empirical evidence of the complementary character of share repurchases was provided by Guay and Harford (2000), Jagannathan et al (2000), Lee and Rui (2007) and Armitage and Gallagher (2021). They showed that share repurchases are associated with temporary components of earnings, whereas dividends are connected to permanent earnings, which makes total payouts more responsive to earnings.…”

Section: Relevance and Drivers Of A Payout Policy With Share Repurchasesmentioning

confidence: 97%

Valuation with Share Repurchases and Personal Taxes

2019

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“…Rau and Vermaelen (2002) report that UK‐listed firms account for about 60% of the repurchasing announcements in Europe. Manconi et al (2019) find the rates of repurchase completion in the United Kingdom to be similar to those in the United States, while Armitage and Gallagher (2021) point out the increasing use of repurchases. The United Kingdom requires firms to quickly disclose their repurchasing trades.…”

Section: Disclosure Environment Motivations For Share Repurchases And...mentioning

confidence: 99%

Flexibility in share repurchases: Evidence from UK

Kulchania

Sonika²

2022

Euro Fin Management

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Although firms cite flexibility as important when repurchasing shares, we know little about how or why firms vary repurchases. We use an extensive sample of daily repurchase transactions from the United Kingdom to investigate how the number of repurchase days and volumes of shares repurchased change based on several known motivations. We find that stock price changes, liquidity, leverage, takeover activity and earnings per share targets impact share repurchasing patterns. Further, we compare actual repurchases to alternative share accumulation strategies and find that firms utilize flexibility without paying higher costs.

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The evolving relation between dividends and flexible payouts: A different evolution

Cited by 7 publications

References 58 publications

The Proposal of Corporate Payout Decisions’ Modelling

The Proposal of Corporate Payout Decisions’ Modelling

Valuation with Share Repurchases and Personal Taxes

Flexibility in share repurchases: Evidence from UK

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