Payout Policy Through the Financial Crisis: The Growth of Repurchases and the Resilience of Dividends
University of Chicago - Booth School of Business
University of Toronto - Rotman School of Management
Douglas J. Skinner
The University of Chicago - Booth School of Business
March 1, 2015
Chicago Booth Research Paper No. 12-01
We compare the payout policies of US industrials and banks over the past 30 years to better understand dividends, especially for banks. For industrials, the declining propensity to pay reverses after 2002, after which dividends grow strongly. Banks have a higher and more stable propensity to pay dividends and resist cutting dividends as the crisis begins. Before the crisis, increases in repurchases push total payouts to historic levels. These findings are broadly consistent with the idea that banks use dividends to signal financial strength while agency costs of free cash flow better explain industrial payouts.
Number of Pages in PDF File: 41
Keywords: Dividends, Repurchases, Dividend signaling, Banks
JEL Classification: G21, G28, G35
Date posted: January 5, 2012 ; Last revised: April 18, 2015
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