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Are Corporate Payouts Abnormally High in the 2000s?

Author

Listed:
  • Kahle, Kathleen

    (U of Arizona)

  • Stulz, Rene M.

    (Ohio State U)

Abstract

Adjusting for inflation, the annual amount paid out through dividends and share repurchases by public non-financial firms is three times larger in the 2000s than from 1971 to 1999. We find that an increase in aggregate corporate income explains 38% of the increase in the average of aggregate annual payouts from 1971-1999 to the 2000s, while an increase in the aggregate payout rate explains 62%. At the firm level, changes in firm characteristics explain 71% of the increase in average payout rate for the population and 49% of the increase in the average payout rate of firms with payouts. Though there is a negative relation between payouts and investment, most of the increase in payouts is unrelated to the decrease in investment. Models estimated over 1971-1999 underpredict the payout rate of firms with payouts in the 2000s. These models perform better when we forecast non-debt-financed payouts for a sample of larger firms, but not for the sample as a whole. Payouts are more responsive to firm characteristics in the 2000s than before, which is consistent with management having stronger payout incentives.

Suggested Citation

  • Kahle, Kathleen & Stulz, Rene M., 2020. "Are Corporate Payouts Abnormally High in the 2000s?," Working Paper Series 2020-03, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2020-03
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    Cited by:

    1. Rüdiger Fahlenbrach & Kevin Rageth & René M Stulz, 2021. "How Valuable Is Financial Flexibility when Revenue Stops? Evidence from the COVID-19 Crisis [The risk of being a fallen angel and the corporate dash for cash in the midst of COVID]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5474-5521.
    2. Fulvia Fringuellotti & Thomas Kroen, 2024. "Payout Restrictions and Bank Risk-Shifting," Staff Reports 1123, Federal Reserve Bank of New York.

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