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Textbook theory assumes that firm managers maximize the net present value of future cash flows. But when you ask them, the people running large public corporations say that they are maximizing something else entirely: earnings per share (EPS). Perhaps this is a mistake. No matter. We take...
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effects considered in signaling games. We show that paying out free cash flow, either as a dividend or via repurchasing shares … dividend as long as capital gains are not heavily discriminated by taxation in relation to dividends. The positive price effect … of dividends can be enhanced if the firm implements a dividend reinvestment plan (DRIP). …
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Textbook theory assumes that firm managers maximize the net present value of future cash flows. But when you ask them, real-world firm managers consistently say that they are maximizing something else entirely: earnings per share (EPS). Perhaps this is a mistake. No matter. We take firm managers...
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