Payout Policy under Heterogeneous Beliefs: A Theory of Dividends versus Stock Repurchases, Price Impact, and Long-Run Stock Returns

2013 ◽  
Author(s):  
Onur Bayar ◽  
Thomas J. Chemmanur ◽  
Mark H. Liu
Keyword(s):  
Stock Returns ◽  
Payout Policy ◽  
Price Impact ◽  
Heterogeneous Beliefs ◽  
Stock Repurchases ◽  
Long Run

Dividends versus Stock Repurchases and Long-Run Stock Returns under Heterogeneous Beliefs

2021 ◽  
Author(s):  
Onur Bayar ◽  
Thomas J Chemmanur ◽  
Mark H Liu
Keyword(s):  
Stock Returns ◽  
Project Success ◽  
Heterogeneous Beliefs ◽  
Stock Repurchases ◽  
External Financing ◽  
Stock Repurchase ◽  
Dividend Payment ◽  
Long Run

Abstract We analyze a firm’s choice between dividends and stock repurchases under heterogeneous beliefs. Firm insiders, owning a certain fraction of equity, choose between paying out cash available through a dividend payment or a stock repurchase, and simultaneously choose the scale of the firm’s project. Outsiders have heterogeneous beliefs about project success and may disagree with insiders. In equilibrium, the firm distributes value through dividends alone, through a repurchase alone, or through a combination of both. In some situations, the firm may raise external financing to fund its payout. We also develop results for long-run stock returns following dividends and repurchases.

scholarly journals Pension funds, large capital inflows and stock returns in a thin market

2018 ◽  
Vol 18 (3) ◽  
pp. 347-387
Author(s):  
JANUSZ BRZESZCZYŃSKI ◽  
MARTIN T. BOHL ◽  
DOBROMIŁ SERWA
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Prices ◽  
Pension Funds ◽  
Price Impact ◽  
Capital Inflows ◽  
Policy Implications ◽  
Private Pension ◽  
Long Run ◽  
Stock Market Investors

Using unique data about capital flows from the public social security institute ZUS (Zakład Ubezpieczeń Społecznych) to private pension funds OFEs (Otwarte Fundusze Emerytalne) in Poland, we find that their impact, as a group of large institutional investors, on stock returns is statistically significant in short-term but no such effect exists in the long-run. This result is consistent with the temporary price pressure hypothesis of Ben-Rephael et al. (2011). We analyze the capital transfers, in the form of the aggregated pension contributions collected from all employees in the entire Polish economy, from the ZUS to the private pension funds, which further invest this capital on the stock market. The average time for the subsequent reaction of stock prices is found to be 4 days. The trading strategy based on this result generates superior outcomes in comparison with the passive strategy, which further confirms the price impact of capital inflows. Our findings are not only relevant for stock market investors but they also have broader policy implications for stock market regulators and for the national pension regulators.

scholarly journals Stock Repurchases: A Theoretical Prediction Model

2011 ◽  
Vol 9 (3) ◽  
Author(s):  
Craig Santicola
Keyword(s):  
Theoretical Prediction ◽  
Prediction Model ◽  
Payout Policy ◽  
Stock Repurchases ◽  
Estimation Model ◽  
Stock Repurchase ◽  
Long Run ◽  
History Of ◽  
Repurchase Programs

There has been a shift in payout policy over the last 15 years with firms opting to conduct stock repurchases over paying dividends. As repurchases have grown so has the corresponding research. Of particular note are findings that identify factors contributing to a firms buyback decision and as well as those that support the existence of long-run return anomalies. While several notable researchers have reported the prevalence and persistence of stock repurchase anomalies, this paper examines the history of repurchase theory and presents a theoretical repurchase prediction model. Using variables shown in the literature to have influence on the decision to repurchase stock, a probit estimation model is developed as a means to identify firms likely to conduct repurchase programs.

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