Working Paper: NBER ID: w26958
Authors: Kathleen Kahle; Ren M. Stulz
Abstract: The average annual inflation-adjusted amount paid out through dividends and repurchases by public industrial firms is more than three times larger from 2000 to 2019 than from 1971 to 1999. We find that an increase in aggregate corporate income accounts for 37% of the increase in aggregate annual payouts and an increase in the payout rate accounts for 63%. Firms have higher payout rates in the 2000s not only because they are older, larger, and have more free cash flow, but also because they pay out more of their free cash flow. Though firms spend less on capital expenditures in the 2000s than before, capital expenditures decrease similarly for the firms with payouts and for firms without.
Keywords: Corporate payouts; Dividends; Repurchases; Financial economics
JEL Codes: G35
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| aggregate corporate income (E25) | aggregate annual payouts (G35) |
| payout rates (G35) | aggregate annual payouts (G35) |
| firm characteristics (L20) | payout rates (G35) |
| age, size, cash flow (D25) | payout rates (G35) |
| capital expenditures (G31) | free cash flow (G39) |
| R&D spending (O32) | free cash flow (G39) |
| institutional investor monitoring (G23) | shareholder wealth maximization (G34) |