Why Are Corporate Payouts So High in the 2000s?

58 Pages Posted: 24 Aug 2020 Last revised: 14 Dec 2020

See all articles by Kathleen M. Kahle

Kathleen M. Kahle

University of Arizona - Department of Finance; European Corporate Governance Institute (ECGI)

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Date Written: December 7, 2020

Abstract

The average annual inflation-adjusted amount paid out through dividends and repurchases by public industrial firms is more than three times larger from 2000 to 2019 than from 1971 to 1999. We find that an increase in aggregate corporate income accounts for 37% of the increase in aggregate annual payouts and an increase in the payout rate accounts for 63%. Firms have higher payout rates in the 2000s not only because they are older, larger, and have more free cash flow, but also because they pay out more of their free cash flow. Though firms spend less on capital expenditures in the 2000s than before, capital expenditures decrease similarly for the firms with payouts and for firms without.

Keywords: payouts, repurchases, dividends, payout rate, firm characteristics, taxes

JEL Classification: G35

Suggested Citation

Kahle, Kathleen M. and Stulz, Rene M., Why Are Corporate Payouts So High in the 2000s? (December 7, 2020). Fisher College of Business Working Paper No. 2020-03-020, Charles A. Dice Working Paper No. 2020-20, European Corporate Governance Institute – Finance Working Paper 669/2020, Available at SSRN: https://ssrn.com/abstract=3678973 or http://dx.doi.org/10.2139/ssrn.3678973

Kathleen M. Kahle

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
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European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

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1000 Brussels
Belgium

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