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Cash Distributions to Shareholders

Cash Distributions to Shareholders Abstract Economists have long been puzzled by why firms pay dividends when alternative methods of rewarding shareholders and financiers exist which involve less taxes. This paper will highlight the fact that firms can distribute cash to equity holders in ways more lightly taxed than dividends. The two methods we examine are share repurchase programs and cash-financed mergers and acquisitions. So why should cash distributions from firms to shareholders ever take the form of dividends? This paper first provides evidence on the explosive growth in dividend cash payments, and then discusses how this evidence should affect theories about corporate finance. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Perspectives American Economic Association

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References (27)

Publisher
American Economic Association
Copyright
Copyright © 1989 by the American Economic Association
Subject
Articles
ISSN
0895-3309
DOI
10.1257/jep.3.3.129
Publisher site
See Article on Publisher Site

Abstract

Abstract Economists have long been puzzled by why firms pay dividends when alternative methods of rewarding shareholders and financiers exist which involve less taxes. This paper will highlight the fact that firms can distribute cash to equity holders in ways more lightly taxed than dividends. The two methods we examine are share repurchase programs and cash-financed mergers and acquisitions. So why should cash distributions from firms to shareholders ever take the form of dividends? This paper first provides evidence on the explosive growth in dividend cash payments, and then discusses how this evidence should affect theories about corporate finance.

Journal

Journal of Economic PerspectivesAmerican Economic Association

Published: Aug 1, 1989

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