Payout Policy Pedagogy: What Matters and Why

Abstract

"This paper argues that we should abandon""MM (1961)""irrelevance as the foundation for teaching payout policy, and instead emphasise the need to distribute the full value generated by investment policy ('full payout'). Because MM's assumptions restrict payouts to an optimum, their irrelevance theorem does not provide the appropriate prescription for managerial behaviour. A simple example clarifies why the correct prescription is 'full payout', and why both payout and investment policy matter even absent agency costs (""DeAngelo and DeAngelo, 2006""). A simple life-cycle generalisation explains the main stylised facts about the payout policies of US and European firms." Copyright 2007 The Authors Journal compilation (c) 2007 Blackwell Publishing Ltd.

Dividends and Market Signalling: an Analysis of Corporate Insider Trading

“…Similarly, in future research we propose to investigate whether the conclusions of the multiple‐signal theory of dividends, and our own results, vary according to whether insiders cater to investor demand for dividends before sending multiple signals. Finally, our results, by highlighting the importance of dividend decisions for signalling purposes, can be considered a departure from the Miller and Modigliani (1961) dividend irrelevance theorem, a conclusion also reached by De Angelo and De Angelo (2007).…”

Moral Hazard, Dividends, and Risk in Banks

“…The existing literature about dividend policies in non‐financial firms finds that the following firm characteristics can influence dividend policy: insider–outsider (IO) conflict (Easterbrook, ; Jensen, ; and Faccio et al., ), asset growth (Fama and French, ), size (Fama and French, ; DeAngelo et al., ; and Denis and Osobov, ), profitability (Fama and French, ; DeAngelo et al., ; and Denis and Osobov, ), earned equity (DeAngelo et al., ; DeAngelo and DeAngelo, ; and von Eije and Megginson, ), a recent quotation on the stock market (Cornett et al., ), and the legal framework of the country of origin (La Porta et al., ). Consequently, several control variables are included to allow for the impact of these factors.…”

Dividend Policies of Privately Held Companies: Stand‐Alone and Group Companies in Belgium

“…Grullon et al . (2002) and De Angelo and De Angelo (2007) argue, based on a company's life cycle theory, which implies that companies pass through different phases of growth, that mature companies in a lower growth phase have fewer investment opportunities. This gives rise to excess cash, which is ultimately paid out, since shareholders of mature companies with low investment opportunities will demand higher dividends.…”