Excess Corporate Payouts and Financial Distress Risk

European Financial Management, Forthcoming

56 Pages Posted: 8 Feb 2016 Last revised: 19 Jan 2021

See all articles by Dimitris Andriosopoulos

Dimitris Andriosopoulos

Strathclyde Business School

Amedeo De Cesari

University of Manchester - Alliance Manchester Business School - Finance & Accounting Group

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School

Date Written: September 10, 2020

Abstract

Firms that follow excessive payout policies (over-payers) are higher on the financial distress spectrum and have lower survival rates than under-payers. In addition, over-payers endure lower future sales and asset growth than under-payers and experience negative abnormal returns in the bond and stock markets. Exogenous import tariff reductions and commodity price jumps reduce the likelihood of overpayment. We interpret this as evidence consistent with financial flexibility considerations, rather than risk-shifting, explaining the decision to overpay. We also find that CEO overconfidence and catering incentives affect overpayment.

Keywords: payout policy, financial distress, firm survival, over-payers, financial flexibility

JEL Classification: G32, G33, G35

Suggested Citation

Andriosopoulos, Dimitris and De Cesari, Amedeo and Stathopoulos, Konstantinos, Excess Corporate Payouts and Financial Distress Risk (September 10, 2020). European Financial Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2728942 or http://dx.doi.org/10.2139/ssrn.2728942

Dimitris Andriosopoulos

Strathclyde Business School ( email )

199 Cathedral Street
Department of Accounting and Finance
Glasgow, G4 0QU
United Kingdom
+44(0)1415483892 (Phone)

HOME PAGE: http://www.strath.ac.uk/staff/andriosopoulosdimitrisdr/

Amedeo De Cesari (Contact Author)

University of Manchester - Alliance Manchester Business School - Finance & Accounting Group ( email )

Crawford House
Booth Street East
Manchester, M15 6PB
United Kingdom
+44 (0) 161 2754298 (Phone)

Konstantinos Stathopoulos

The University of Manchester - Alliance Manchester Business School ( email )

AMBS Building
Booth Street West
Manchester, M15 6PB
United Kingdom
+44 161 275 6863 (Phone)
+44 161 275 4023 (Fax)

HOME PAGE: http://www.research.manchester.ac.uk/portal/K.Stathopoulos.html

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
238
Abstract Views
1,365
rank
156,795
PlumX Metrics