Corporate payout policy: Cash Dividends versus Open-Market Repurchases☆

  title={Corporate payout policy: Cash Dividends versus Open-Market Repurchases☆},
  author={Michael J. Barclay and Clifford W. Smith},
  journal={Journal of Financial Economics},
Theories of corporate payout policy do not explain the observed form of distributions to shareholders. Although open-market repurchases appear to have tax advantages, cash dividends are overwhelmingly chosen. We argue that there are costs associated with open-market-repurchase programs, since they provide managers with opportunities to use inside information to benefit themselves at stockholders' expense. We offer evidence suggesting that bid-ask spreads widen around repurchase announcements… Expand