This paper examines how shareholder investment horizons influence payout policy choices. The authors infer institutional shareholders' investment horizons using the churn rate of their overall stock portfolios prior to the payout decision. The authors find that the frequency and amount of...

We examine how shareholder investment horizons influence firms’ payout decisions. We find that US firms held by short-term institutional investors have a higher propensity to buybacks shares instead of using dividends. Firm managers seem to respond to the preferred payout policy of investors...

This article studies one of the potential causes of the financial market bubble of the late 1990s: the herding behavior of mutual funds. We show that the incentives contained in the mutual funds' advisory contracts induce managers to overcome their tendency to herd. We argue that investing in...