Organizational Structure and Corporate Payout Policy

64 Pages Posted: 11 Dec 2013

See all articles by Bradford D. Jordan

Bradford D. Jordan

University of Florida; University of Florida - Department of Finance, Insurance and Real Estate

Mark H. Liu

University of Kentucky - Gatton College of Business and Economics

Qun Wu

U of Nevada, Reno

Date Written: December 10, 2013

Abstract

We examine how organizational structure affects corporate payout policies. Conglomerates (multi-segment firms) pay out more than pure plays (single-segment firms) in both cash dividends and total payouts (defined as cash dividends plus share repurchases). Further, corporate payouts increase as the cross-segment correlation (cash flow or investment) in a conglomerate decreases. The above effects are more pronounced for regular cash dividends than for special cash dividends or stock repurchases. To address the endogeneity issues, we also examine corporate payout changes around M&As. Corporate payouts increase after M&As, especially among M&As in which acquirers and targets are less correlated (earnings or investments). The results suggest that retaining earnings to keep financial slack is an important consideration when firms make corporate payout decisions.

Keywords: cash dividends, payout policy, share repurchase, mergers and acquisitions, cross-segment correlations

JEL Classification: G34; G35

Suggested Citation

Jordan, Bradford D. and Liu, Mark H. and Wu, Qun, Organizational Structure and Corporate Payout Policy (December 10, 2013). Available at SSRN: https://ssrn.com/abstract=2365873 or http://dx.doi.org/10.2139/ssrn.2365873

Bradford D. Jordan

University of Florida ( email )

Gainesville, FL 32611
United States

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

Mark H. Liu (Contact Author)

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States
859-257-9842 (Phone)
859-257-9688 (Fax)

Qun Wu

U of Nevada, Reno ( email )

1664 N Virginia St
Reno, NV NEVADA 89557
United States
7756829173 (Phone)

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