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Has the Propensity to Pay Out Declined?

Published online by Cambridge University Press:  26 October 2010

Gustavo Grullon ,
Bradley Paye ,
Shane Underwood  and
James P. Weston
Gustavo Grullon
Affiliation:
Rice University, Jones Graduate School of Business, 6100 Main St., MS 531, Houston, TX 77005. grullon@rice.edu
Bradley Paye
Affiliation:
Rice University, Jones Graduate School of Business, 6100 Main St., MS 531, Houston, TX 77005. bpaye@rice.edu
Shane Underwood
Affiliation:
University of Alabama, College of Business Administration, Box 870224, Tuscaloosa, AL 35487. seunderwood@cba.ua.edu
James P. Weston
Affiliation:
Rice University, Jones Graduate School of Business, 6100 Main St., MS 531, Houston, TX 77005. westonj@rice.edu
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Abstract

Recent studies document both a significant decline in firms’ propensity to pay dividends and a significant increase in firms’ propensity to repurchase shares and issue equity over the past 30 years. In this paper we test whether firms’ net cash disbursements to equity holders have declined in a pattern similar to firms’ propensity to pay dividends. Contrary to the evidence using dividends, we find no evidence that the conditional propensity to distribute net cash to equity holders has declined over the past 3 decades. Surprisingly, we find that, conditional on firm characteristics, net payout yields have been increasing over time.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 46 , Issue 1 , February 2011 , pp. 1 - 24
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2011

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