Patterns in payout policy and payout channel choice

Draft version dated October 2005; also published as TILEC Discussion Paper no. 2005-02, CentER Discussion Paper no. 2005-22, and ECGI Discussion Paper no. 70/2005. Final version published by Elsevier; available online at the DOI in this recordWe study the decision to distribute funds as well as the choice of the payout channel (i.e. dividends, repurchases, or both). Our analysis of the payout policy of UK firms demonstrates that the importance of share repurchases is increasing, but dividends still constitute a vast proportion of the total payout. We document that there is a relation between the presence of blockholders and the choice of the payout channel. We find that payout decisions are influenced by directors’ liquidity needs but are not consistent with the agency theory of payout. We also reject the tax-clientele explanation for payout choices