Payout Policy Analysis in Financing Tools of Firm’s Choices
Date Issued
2015
Date
2015
Author(s)
Hsu, Wen-Chin
Abstract
This paper targets to discuss how firms choose their financing policy from patterns of payout policy. By payout patterns analysis of Skinner (2008) as well as capital structure and dividend payout simultaneous equations of Aggarwal & Kyaw (2010), empirical evidences support the hypothesis that there are differences in financing policy between different patterns of payout policy. Conclusions: (1) Debt ratio is negatively related to payout ratio mainly contributing to dividend payout with positive relationship of repurchase ratio. Empirical result also shows that share repurchase is long-term financial decision. (2) Level of payout ratio depends on dividend payout. Firms with unstable dividends use repurchase as complementary still have lower payout ratio than those with stable dividends. In addition, firms with stable repurchase tend to choose long-term debt to maintain stability of repurchase, while those with unstable repurchase tend to use more flexible short-term debt to finance it temporary needs of funds. (3) For the firm using both dividends and repurchases, empirical result shows short-term debt ratio is negatively related to overall stability of payout, while long-term debt is related to types of payout. To use both of dividend and repurchase, there is more demand to flexible funds.
Subjects
cash dividends
share repurchase
payout policy
financing policy
Type
thesis
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ntu-104-R02723043-1.pdf
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