Relationship Life Cycle and Firm’s Payout Policy

40 Pages Posted: 5 Feb 2020

See all articles by Giang Nguyen

Giang Nguyen

RMIT University - School of Economics, Finance and Marketing

Date Written: January 13, 2020

Abstract

This paper examines the effect of relationship duration with major customer on supplier’s payout policies. I find that firm which remains the relation with major customer in a longer period pays higher dividend. This finding is unbiased by the substitutional effect between dividend and repurchase and robust in different model specifications. Digging deeper, I find that the positive effect of relationship duration with major customer on supplier dividend payout is contributable to the reduction in adverse effect of cash flow volatility, dependence on major customer and the increase in knowledge spillovers from customer.

Keywords: dividend, relationship life cycle, financial destress, cash-flow volatility

JEL Classification: G35, M31

Suggested Citation

Nguyen, Giang, Relationship Life Cycle and Firm’s Payout Policy (January 13, 2020). Available at SSRN: https://ssrn.com/abstract=3518224 or http://dx.doi.org/10.2139/ssrn.3518224

Giang Nguyen (Contact Author)

RMIT University - School of Economics, Finance and Marketing ( email )

Australia

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