Excess corporate payouts and financial distress risk

Dimitris Andriosopoulos; Amedeo De Cesari; Konstantinos Stathopoulos

doi:10.1111/eufm.12291

Excess corporate payouts and financial distress risk

Dimitris Andriosopoulos, Amedeo De Cesari, Konstantinos Stathopoulos

Accounting And Finance

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

18 Downloads (Pure)

Abstract

Firms that follow excessive payout policies (over-payers) are higher on the financial distress spectrum and have lower survival rates than under-payers. In addition, over-payers endure lower future sales and asset growth than under-payers and experience negative abnormal returns in the bond and stock markets. Exogenous import tariff reductions and commodity price jumps reduce the likelihood of overpayment. We interpret this as evidence consistent with financial flexibility considerations, rather than risk-shifting, explaining the decision to overpay. We also find that CEO overconfidence and catering incentives affect overpayment.

Original language	English
Pages (from-to)	865-898
Number of pages	34
Journal	European Financial Management
Volume	27
Issue number	5
Early online date	3 Jan 2021
DOIs	https://doi.org/10.1111/eufm.12291
Publication status	Published - 30 Nov 2021

Keywords

payout policy
financial distress
firm survival
over-payers
financial flexibility

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

Access to Document

10.1111/eufm.12291

Andriosopoulos-etal-EFM-2020-Excess-corporate-payouts-and-financial-distress-riskAccepted author manuscript, 503 KB

6 Citations
1 Working paper

Overpayment, Financial Distress, and Investor Horizons
Andriosopoulos, D., De Cesari, A. & Stathopoulos, K., 12 Jan 2016, Glasgow, 45 p.
Research output: Working paper

Open Access
File

4 Invited talk

Presentation at the Contemporary Issues in Financial Markets hosted by the University of International Business and Economics.
Andriosopoulos, D. (Speaker), De Cesari, A. (Contributor) & Stathopoulos, K. (Contributor)
15 Nov 2019 → 16 Nov 2019
Activity: Talk or presentation types › Invited talk
Accounting and Finance research seminars - University of Sussex
Andriosopoulos, D. (Invited speaker)
3 Mar 2016
Activity: Talk or presentation types › Invited talk
University of Coventry - School of Economics Finance and Accounting
Andriosopoulos, D. (Invited speaker)
3 Feb 2016
Activity: Talk or presentation types › Invited talk

Cite this

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title = "Excess corporate payouts and financial distress risk",

abstract = "Firms that follow excessive payout policies (over-payers) are higher on the financial distress spectrum and have lower survival rates than under-payers. In addition, over-payers endure lower future sales and asset growth than under-payers and experience negative abnormal returns in the bond and stock markets. Exogenous import tariff reductions and commodity price jumps reduce the likelihood of overpayment. We interpret this as evidence consistent with financial flexibility considerations, rather than risk-shifting, explaining the decision to overpay. We also find that CEO overconfidence and catering incentives affect overpayment. ",

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AU - De Cesari, Amedeo

AU - Stathopoulos, Konstantinos

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AB - Firms that follow excessive payout policies (over-payers) are higher on the financial distress spectrum and have lower survival rates than under-payers. In addition, over-payers endure lower future sales and asset growth than under-payers and experience negative abnormal returns in the bond and stock markets. Exogenous import tariff reductions and commodity price jumps reduce the likelihood of overpayment. We interpret this as evidence consistent with financial flexibility considerations, rather than risk-shifting, explaining the decision to overpay. We also find that CEO overconfidence and catering incentives affect overpayment.

KW - payout policy

KW - financial distress

KW - firm survival

KW - over-payers

KW - financial flexibility

U2 - 10.1111/eufm.12291

DO - 10.1111/eufm.12291

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JO - European Financial Management

JF - European Financial Management

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ER -

Excess corporate payouts and financial distress risk

Abstract

Keywords

UN SDGs

Access to Document

Fingerprint

Research output

Overpayment, Financial Distress, and Investor Horizons

Activities

Presentation at the Contemporary Issues in Financial Markets hosted by the University of International Business and Economics.

Accounting and Finance research seminars - University of Sussex

University of Coventry - School of Economics Finance and Accounting

Cite this