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Chapter 7

Payout Policy

Franklin Allen* University of Pennsylvania^* We are in debt to Gustavo Grullon for his insights and help on this project. We would like to thank Harry DeAngelo, Eric Lie, René Stulz and Jeff Wurgler for their comments and suggestions. We would also like to thank Meenakshi Sinha for her research assistance.

Roni Michaely Cornell University and IDC

Abstract

This paper surveys the literature on payout policy. We start out by discussing several stylized facts that are important to the development of any comprehensive payout policy framework. We then describe the Miller and Modigliani (1961) payout irrelevance proposition, and consider the effect of relaxing the assumptions on which it is based. We consider the role of taxes, ...

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