Why Are Corporate Payouts So High in the 2000s?
Charles A. Dice Working Paper No. 2020-20
58 Pages Posted: 24 Aug 2020 Last revised: 14 Dec 2020
Date Written: December 7, 2020
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: Suggested Citation