Why Are Corporate Payouts So High in the 2000s?
The average annual inflation-adjusted amount paid out through dividends and repurchases by public industrial firms is more than three times larger from 2000 to 2019 than from 1971 to 1999. We find that an increase in aggregate corporate income accounts for 37% of the increase in aggregate annual payouts and an increase in the payout rate accounts for 63%. Firms have higher payout rates in the 2000s not only because they are older, larger, and have more free cash flow, but also because they pay out more of their free cash flow. Though firms spend less on capital expenditures in the 2000s than before, capital expenditures decrease similarly for the firms with payouts and for firms without.
This paper revises and extends our earlier paper titled “Are corporate payouts abnormally high in the 2000s?” We thank Monica Banyi and Harry DeAngelo for useful discussions and Ye Li, Roni Michaely, Tu Nguyen, Neal Stoughton, an anonymous referee, and seminar participants at The Ohio State University, University of Geneva, University of Nevada – Las Vegas, University of Wyoming, and University of Waterloo for their comments. We also thank Leandro Sanz for scientific assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- A greater proportion of American companies are older, larger, and more profitable than in the late 20th century, which explains much...