Journal of Banking & Finance Vol. 134 2022
Institutional investors’ horizon and equity-financed payouts
Abstract
Farre-Mensa, Michaely and Schmalz (2018) document that many firms issue new equity to finance their payouts to shareholders, despite the substantial cost of equity issuance. We find that equity-financed payouts are related to institutional investors’ horizon. Specifically, firms with a larger ownership by short-horizon institutions are more likely to have equity-financed discretionary payouts, and firms with equity-financed discretionary payouts tend to cut down their investments in the following years. Our results suggest that investor short-termism has significant effects on firms’ payout, financing and investment policies.
- DOI
- 10.1016/j.jbankfin.2021.106324
- Volume
- 134
- Pages
- 106324
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref