Abstract
Abstract
We find that 43% of firms that make payouts also raise capital during the same year, resulting in 31% of aggregate payouts being externally financed, primarily with debt. Most financed payouts cannot be explained by payout smoothing in response to volatile earnings or investment (rather, they are the result of firms persistently setting payouts above free cash flow). In fact, 25% of aggregate payouts could not have been paid without the firms simultaneously raising capital. Profitable firms with moderate growth use debt-financed payouts to jointly manage their leverage and cash, thus highlighting the close relationship between payout and capital structure decisions.
Publisher
Cambridge University Press (CUP)
Reference56 articles.
1. Dividend and Corporate Taxation in an Agency Model of the Firm;Chetty;American Economic Journal: Economic Policy,2010
2. Apple Inc. “Prospectus Supplement Dated February 2.” Available at https://www.sec.gov/Archives/edgar/data/320193/000119312515031599/d861669d424b2.htm (2015).
3. Are There Economies of Scale in Underwriting Fees? Evidence of Rising External Financing Costs
4. Leverage and Cash Dynamics
5. Business Dynamics Statistics of High Tech Industries;Goldschlag;Journal of Economics and Management Strategy,2020