The Evolving Relation Between Earnings, Dividends, and Stock Repurchases

64 Pages Posted: 3 Nov 2007  

Douglas J. Skinner

The University of Chicago - Booth School of Business

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Abstract

This paper examines how the relation between earnings and payout policy has evolved over the last three decades. Three principal groups of payers have emerged: firms that pay dividends and make regular repurchases, firms that make regular repurchases, and firms that make occasional repurchases. Firms that only pay dividends are largely extinct. Repurchases are increasingly used in place of dividends, even for firms that continue to pay dividends. While other factors help explain the timing of repurchases, the overall level of repurchases is fundamentally determined by earnings. The results suggest that repurchases are now the dominant form of payout.

Keywords: dividends, stock repurchases, payout policy, earnings

JEL Classification: G35, M41

Suggested Citation

Skinner, Douglas J., The Evolving Relation Between Earnings, Dividends, and Stock Repurchases. Journal of Financial Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1027059

Douglas J. Skinner (Contact Author)

The University of Chicago - Booth School of Business ( email )

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Chicago, IL 60637
United States
773-702-7137 (Phone)

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