Journal article
Financing payouts
- 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.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
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(Preview, Version of record, pdf, 1.2MB, Terms of use)
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- Publisher copy:
- 10.1017/S0022109024000231
Authors
- Publisher:
- Cambridge University Press
- Journal:
- Journal of Financial and Quantitative Analysis More from this journal
- Volume:
- 60
- Issue:
- 4
- Pages:
- 1586 - 1624
- Publication date:
- 2024-04-01
- Acceptance date:
- 2024-02-20
- DOI:
- EISSN:
-
1756-6916
- ISSN:
-
0022-1090
- Language:
-
English
- Pubs id:
-
1627737
- Local pid:
-
pubs:1627737
- Deposit date:
-
2024-02-22
Terms of use
- Copyright holder:
- Farre-Mensa et al
- Copyright date:
- 2024
- Rights statement:
- © The Author(s), 2024. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington
- Notes:
- This is the accepted manuscript version of the article. The final version is available online from Cambridge University Press at https://dx.doi.org/10.1017/S0022109024000231
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