Managerial Flexibility Effect and Information Content of Dividend versus Stock Repurchase

39 Pages Posted: 26 Jul 2022

See all articles by Donna L. Paul

Donna L. Paul

Washington State University

He Wang

Southern University of Science and Technology

Rong Wang

University of Queensland

Feida Zhang

University of Queensland - Accounting and Accountability

Date Written: July 1, 2020

Abstract

This paper tests trade-off and pecking order predictions about stock repurchases and dividends by using a sample of publicly traded U.S. firms from 1983-2018. We find that stock repurchases have the characteristics of dynamic adjustment compared to cash dividends. Examination of the determinants and information content of dividend and repurchases provides evidence supportive of a managerial flexibility effect of stock repurchases in both time-series and cross-sectional tests. Our evidence shows that both the static tradeoff model and the pecking order model explain the stock repurchase behavior of publicly traded U.S. firms.

Keywords: Managerial Flexibility Effect; Payout Policy; Stock Repurchase; Capital Structure; Mean-Reverting

Suggested Citation

Paul, Donna L. and Wang, He and Wang, Rong and Zhang, Feida, Managerial Flexibility Effect and Information Content of Dividend versus Stock Repurchase (July 1, 2020). Available at SSRN: https://ssrn.com/abstract=4154563 or http://dx.doi.org/10.2139/ssrn.4154563

Donna L. Paul

Washington State University ( email )

Carson College of Business
WA
United States

He Wang

Southern University of Science and Technology ( email )

1088 Xueyuan Avenue
Shenzhen, Guangdong 518055
China

Rong Wang (Contact Author)

University of Queensland ( email )

Australia
0493412066 (Phone)

Feida Zhang

University of Queensland - Accounting and Accountability ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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