Financial Policy, Internal Control, and Performance: Sealed Air Corporation's Leveraged Special Dividend
Posted: 7 May 1998
Date Written: April 1994
This paper examines the role of financial policy as a catalyst for organizational change. The subject is Sealed Air Corporation, a company with substantial free cash flow that undertakes a leveraged special dividend. While the stock price response to announcement is typical, Sealed Air exhibits dramatic, sustained, post-dividend performance improvement. Evidence indicates this performance results from managers? conscious and successful use of financial leverage as a tool to disrupt the status quo and promote internal change, including establishing a new objective, changing compensation systems, and reorganizing manufacturing and capital budgeting processes.
JEL Classification: G31, G32, G34, G35
Suggested Citation: Suggested Citation