Why are corporate payouts so high in the 2000s?

Kahle, Kathleen M.; Stulz, René M.

doi:10.1016/j.jfineco.2021.06.020

Cited by 33 publications

(12 citation statements)

References 45 publications

(37 reference statements)

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“…This conservative approach to dividend increases is intuitive given a context of reliable planning at only short horizons and firms underestimating the left tail of their earnings 50 As additional evidence of payout process stability, Section VIII of the Internet Appendix shows that the simple Lintner (1956) model of increasing payout at a smooth rate toward a target payout ratio still works well in explaining dividends. The stability in what drives payout is also evident in Kahle and Stulz's (2021) finding that models estimated on firm characteristics using pre-2000 data explain much of the change in payout post-2000.…”

Section: Repmentioning

confidence: 92%

Presidential Address: Corporate Finance and Reality

Graham¹

2022

The Journal of Finance

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This paper uses surveys to document CFO perspectives on corporate planning, investment, capital structure, payout, and shareholder versus stakeholder focus. Comparing policy decisions today to those 20 years ago, I find that companies employ decision rules that are conservative, sticky, and geared to time the market; rely on internal forecasts that are miscalibrated and considered reliable only two years ahead; and emphasize corporate objectives that focus increasingly on stakeholders and revenues. These practice of corporate finance themes can discipline academic models toward better explaining outcomes. Models of satisficing decision-making or costly managerial biases align with many of the themes.

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Section: Repmentioning

confidence: 92%

Presidential Address: Corporate Finance and Reality

Graham¹

2022

The Journal of Finance

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“…However, the general trends and takeaways discussed below remain unchanged. Kahle and Stulz (2021) document a similar trend of increasing payouts. They attribute the increase in repurchases to higher corporate income and higher payout rates.…”

Section: Trends In Repurchase Behaviormentioning

confidence: 75%

“…For example, detractors have accused the airline industry (especially American Airlines) of abusing repurchases, specifically for using almost all of their spare cash to buy back shares at the expense of their financial security, that is, instead of paying down debt or holding cash (see recent Repurchases, being frequent and often substantial in magnitude, are the subject of an extensive finance and accounting literature (for a review, see Bonaime & Kahle, 2022). The questions and arguments we examine have been the subject of many of these studies, which among other things provide evidence on increasing payout trends (Kahle & Stulz, 2021), the contrasting flexibility of repurchases and dividends (Bliss et al, 2015;Dittmar & Dittmar, 2008;Floyd et al, 2015), the (small and temporary) price effects of repurchases (Bargeron & Farrell, 2021;Grullon & Michaely, 2004), CEO behavior and compensation around repurchases (Busch & Obernberger, 2017;Edmans et al, 2021;Moore, 2023), correlations of repurchases with profitability and investment (Brav et al, 2005;Fried & Wang, 2019), and the cash management of poorly run firms (Dittmar & Mahrt-Smith, 2007).…”

Section: Introductionmentioning

confidence: 99%

Share repurchases on trial: Large‐sample evidence on share price performance, executive compensation, and corporate investment

Guest

Kothari

Venkat

2023

Financial Management

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Using a large sample of US stocks covering more than three decades, we empirically examine common criticisms of and rationales for stock repurchases. Repurchases account for a tiny fraction of the trading volume in a typical stock, making their price impact too small to generate short‐term price manipulation. Price appreciation following repurchases is modest and does not reverse on average, suggesting the small price increases following repurchases signal firms’ good prospects. Also, we find no evidence that CEOs of repurchasing firms are paid excessively or that repurchases crowd out valuable investment opportunities. Because repurchases do not appear to be systematically abusive, enforcement action should be sufficient to deal with any bad actors, and significant regulation seems unwarranted.

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“…This means that companies are allocating more and more profits to shareholders. Kahle andStulz (2021, 1360) found that in the 21st century the increase in aggregate corporate income accounts for 37% of the increase in aggregate annual payouts, and the increase in the payout ratio accounts for 63%. However, the increase in global dividend payments was not the same in all countries and was subject to geographical, economic and legal regionalization.…”

Section: Discussion Of the Results And Conclusionmentioning

confidence: 99%

“…Recent USA market research by Kahle andStulz (2021, 1360) found that "the average annual inflation-adjusted amount paid out through dividends and repurchases by public industrial firms in USA is more than three times larger from 2000 to 2019 than from 1971 to 1999. "…”

Section: Literature Reviewmentioning

confidence: 99%

The Geographical, Economic and Legal Regionalization of the Changes in Dividend Payments in the World

Kowerski¹

2022

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The dynamic growth of nominal and real values of dividends paid in the world, observed since the last quarter of the twentieth century, is determined by the companies with the largest capitalization. However, the increase in global dividend payments is not the same in all countries and is subject to geographical, economic and legal regionalization. It is also disturbed by economic fluctuations (especially the 2008 crisis) and, more recently, by the COVID-19 pandemic. The paper, using the data from the survey of Janus Henderson Investments, analyses changes in dividend payments in geographical (continents) economic (countries with a similar level of economic development) and legal (countries with similar legal systems) regions by the 1,200 largest companies in the world between 2009 and 2021. Linnear trend models taking into account the COVID-19 pandemic in the world and in separate regions and subregions, as well as the panel partial adjustment model of dividends vs. GDP, were estimated. The conducted research confirmed the impact of different forms of regionalization on the rate of dividend payments by the world’s largest companies. In the years 2009–2021 dividend payments in Australia and Asia grew the fastest. COVID-19 significantly reduced dividend payments in 2020 in Europe. Dividend payments in emerging markets countries grew faster than in developed markets countries and COVID-19 did not significantly reduce payouts on emerging markets. However, it is the developed markets that still provide the vast majority of dividends. The common law system is more favorable to dividend payments.

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Why are corporate payouts so high in the 2000s?

Cited by 33 publications

References 45 publications

Presidential Address: Corporate Finance and Reality

Presidential Address: Corporate Finance and Reality

Share repurchases on trial: Large‐sample evidence on share price performance, executive compensation, and corporate investment

The Geographical, Economic and Legal Regionalization of the Changes in Dividend Payments in the World

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