Accounting Research Papers

Payout Policy

by 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. Key concepts include: Studies centered on the 2003 dividend tax cut confirm that differences in the taxation of dividends and capital gains have only a second order impact on payout policy. Signaling theories have found only weak support, both empirically and in survey evidence, which likely explains why the notion of dividends as costly signals of firm quality to the market has become less popular. Agency has often prevailed as the alternative explanation in the horse race against signaling theories. A number of factors other than the level of free cash flow determine the level and form of payouts. More research is needed to understand even the basic elements of the corporate financial 'ecosystem', which includes financing, investment, and payout policies. Analyzing these interactions can play a key role in advancing the payout literature in the years to come. Closed for comment; 0 Comment(s) posted.

Remembering Past Editor, Nicholas Dopuch

We are sad to share the news that Nicholas Dopuch, our former colleague and editor of the Journal of Accounting Research, died Sunday, February 4, at age 88.

At Chicago from 1961 to 1983, he became the second editor of JAR in 1968 and remained until 1983, having a tremendous and lasting impact on both JAR and the academic accounting community. He continued as co-editor for an additional 15 years. After Chicago, he spent the rest of his career at Washington University in St. Louis.

As stated on his Accounting Hall of Fame membership page, “As editor, he guided countless accounting researchers into rigorous empirical and theoretical work and fostered new approaches to accounting and auditing problems. His insistence on excellence, and his willingness to work with aspiring researchers to achieve that level, greatly enhanced the quality of research in accounting and established the JAR as the preeminent accounting research journal.”

In 2015, for the 50th anniversary of the JAR conference, Nick sat down and shared some of his memories at the University of Chicago and with JAR. You can view it here.

Information about Nick’s distinguished career and memorial arrangements can be found here.



Five Year Impact Factor: 3.368

Ranked within the top 10 Business/Finance journals in the world, the Journal of Accounting Research is pleased to announce a 2016 Impact Factor of 3.0, and a five-year Impact Factor of 3.368.

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Announcement of 2019 JAR Conference Call for Papers

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