Excess Funds and Agency Problems: An Empirical Study of Incremental Cash Disbursements

Excess Funds and Agency Problems: An Empirical Study of Incremental Cash Disbursements This study investigates the excess funds hypothesis using samples of special dividends, regular dividend increases, and self-tender offers. All three types of firms tend to have funds in excess of industry norms before the events. The excess funds are largely nonrecurring for special dividend and self-tender offer firms and recurring for regular dividend increase firms. The analysis of the stock price reaction suggests that large incremental disbursements mitigate the agency problem associated with excess funds. In particular, the stock price reaction is positively related to excess funds for self-tender offers and large special dividends, but not for regular dividend increases (which tend to be smaller) or small special dividends. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Financial Studies Oxford University Press

Excess Funds and Agency Problems: An Empirical Study of Incremental Cash Disbursements

The Review of Financial Studies, Volume 13 (1) – Jan 15, 2000

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Publisher
Oxford University Press
Copyright
© 2000 The Society for Financial Studies
ISSN
0893-9454
eISSN
1465-7368
D.O.I.
10.1093/rfs/13.1.219
Publisher site
See Article on Publisher Site

Abstract

This study investigates the excess funds hypothesis using samples of special dividends, regular dividend increases, and self-tender offers. All three types of firms tend to have funds in excess of industry norms before the events. The excess funds are largely nonrecurring for special dividend and self-tender offer firms and recurring for regular dividend increase firms. The analysis of the stock price reaction suggests that large incremental disbursements mitigate the agency problem associated with excess funds. In particular, the stock price reaction is positively related to excess funds for self-tender offers and large special dividends, but not for regular dividend increases (which tend to be smaller) or small special dividends.

Journal

The Review of Financial StudiesOxford University Press

Published: Jan 15, 2000

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