Payout Policy in the 21st Century

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CFA Digest
February 2006 | Vol. 36 | No. 1 | 2 pages
Source: CFA Institute
Alon Brav John R. Graham Campbell R. Harvey Roni Michaely
Spencer L. Klein, CFA (Reviewer)

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Abstract

The authors investigate companies' decision-making processes on dividends and share repurchases through the use of extensive surveys. Their survey results show that maintaining dividend levels is as important as making positive net present value (NPV) investment decisions. In contrast, they find that share repurchases are often enacted only when excess cash flows exist. Over the past years, the relationship between earnings and dividends has softened, primarily because of changes in tax policies and perceived investor preferences.

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Topics
Corporate Finance
    :
  • Capital Investment Decisions
  • ·
  • Long-Term Financial Policy
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