Cost Structure and Payout Policy

Financial Management, Forthcoming

49 Pages Posted: 20 Feb 2015 Last revised: 12 Jul 2016

See all articles by Manoj Kulchania

Manoj Kulchania

Wayne State University - Finance Group

Date Written: February 18, 2015


I investigate the effects of firms’ proportion of fixed and variable costs on their payout policy. The investigation finds that firms with higher fixed costs pay a lower fraction of their operating income in dividends and share repurchases. Further, these firms return a higher fraction of their payout via share repurchases because this method offers greater flexibility. These firms also have significantly higher volatility in their future cash flows and more variable future operating incomes. The results are robust to several alternate specifications and firm-level controls and show that the firms’ cost structure plays a significant role in payout policy choices.

Keywords: Payout; Cost Structure, Repurchases; Operating Leverage; Fixed Cost

JEL Classification: G35

Suggested Citation

Kulchania, Manoj, Cost Structure and Payout Policy (February 18, 2015). Financial Management, Forthcoming, Available at SSRN: or

Manoj Kulchania (Contact Author)

Wayne State University - Finance Group ( email )

2771 Woodward Ave
Detroit, MI 48201
United States
313-577-7837 (Phone)


Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics