Overpayment, Financial Distress, and Investor Horizons

Dimitris Andriosopoulos, Amedeo De Cesari, Konstantinos Stathopoulos

Research output: Working paper

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Firms that follow excessive payout policies (over-payers) have significantly higher financial distress risk and lower survival compared to under-payers, consistent with risk-shifting from shareholders to creditors in distressed firms. All else equal, the presence of institutional investors with long-term investment horizons in a firm is associated with overpayment. A transition analysis indicates the existence of a reciprocal relation between overpayment and financial distress, highlighting the feedback effects between overpayment and distress. In addition, over-payers endure smaller future sales and assets growth, and experience a significant future increase in the overall riskiness of their assets, compared to under-payers.
Original languageEnglish
Place of PublicationGlasgow
Number of pages45
Publication statusPublished - 12 Jan 2016


  • payout policy
  • financial distress
  • firm survival
  • institutional investor
  • over-payers
  • corporate governance


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