One of the most important predictions of the dividend-signaling hypothesis is that dividend changes are positively correlated with future changes in profitability and earnings. Contrary to this prediction, we show that after controlling for the well-known non-linear patterns in the behavior of...

We show that repurchases have not only became an important form of payout for U.S. corporations, but also that firms finance their share repurchases with funds that otherwise would have been used to increase dividends. We find that young firms have a higher propensity to pay cash through...

Firms that increase (decrease) dividends experience a significant decline (increase) in their systematic risk. The dividend-increasing firms do not increase their capital expenditure and experience a decline in profitability in the years after the dividend change. The positive market reaction to...

This paper shows that firms in more competitive industries pay higher dividends than do firms in less competitive markets. We establish a causal link by showing that an exogenous increase in competition due to large tariff reductions leads to higher dividend payout ratios. Further tests,...

We use the Sarbanes Oxley Act (SOX) as a natural experiment of a shock to internal governance to examine the link between product market competition and internal governance mechanisms. Consistent with the notion that product market competition is a close substitute for internal governance, we...

We use the Sarbanes Oxley Act (SOX) as a quasi-natural experiment to examine the link between product market competition and internal governance mechanisms. Consistent with notion that competition plays an important role in aligning incentives within the firm, SOX led to a larger improvement in...

Contrary to the implications of many payout theories, we find that announcements of open-market share repurchase programs are not followed by an increase in operating performance. However, we find that the systematic risk and the cost of capital of these firms decline after these events....