Taxes on capital gains are deferred until realization, whereas dividend taxes are levied upon accrual. This often makes dividends tax-disadvantaged relative to share repurchases, which leads to the payout puzzle: why do firms pay dividends? This paper develops a model of corporate payout policy...

This paper studies the impact of banks’ dividend restrictions on the behavior of their institutional investors. Using an identification strategy that relies on the within investor variation and a difference in difference setup, I find that funds permanently decrease their ownership shares at...

Banks' assets are opaque, and therefore, we model their true accounting asset values as partially observed variables. We derive a stochastic control model to optimize banks' dividend and recapitalization policies in this situation, and calibrate that to a sample of U.S. banks. By the calibrated...

This paper shows that both value and momentum premia arise in a q-theoretic framework that considers optimal corporate policies under uncertain financing conditions. Book-to-market and past performance predict future returns because they serve as indicators of firm financing position. The...

Traditional finance theory suggests that riskier investments should yield higher returns. Challenging this notion, anecdotal and empirical evidence suggests that highly-incented managers may take on excessive risk, leading to greater losses, while other theoretical research argues that high...

We compare the stock return forecasting performance of alternative payout yields. The net payout yield produces more accurate forecasts relative to alternatives, including the traditional dividend yield. This remains true even after excluding several years during the Great Depression when...

Recent research documents the superiority of dividend-yield based trading rules over a buy-and-hold strategy in the U.S. and Finland. We extend the international evidence on the superiority of dividend-yield based trading rules by examining whether the trading rules outperform a buy-and-hold...

We use institutional trading data to examine whether skilled institutions exploit positive abnormal ex-dividend returns. Results show that institutions concentrate trading around certain ex-dates, and earn higher profits around these events. Dividend capture trades represent 6% of all...

This paper presents an alternative theory explaining why firms adopt dividend policies of various kinds at intermediate levels. We extend the dividend clientele model from a traditional corner-solution framework to an interior-solution framework. For some investors, intertemporal double taxation...