Corporate Payout Policy and Bad-News Hoarding

Dimitrios Anastasiou, Athanasios Michairinas, Steven Ongena and Athanasios Sakkas
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Dimitrios Anastasiou: Athens University of Economics and Business - Department of Business Administration
Athanasios Michairinas: Athens University of Economics and Business - Department of Business Administration
Steven Ongena: University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)
Athanasios Sakkas: Athens University of Economics and Business - Department of Business Administration

No 26-38, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We investigate how G7-listed firms (2000–2023) adjust payout policies when facing stock price crash risk, which proxies for investor concerns about bad-news hoarding. Exposed firms increase dividends and repurchases to reassure investors, shifting their payout mix toward dividends given their stronger commitment value. However, these stabilizing payouts entail real economic costs: under high crash risk, firms, especially smaller ones, fund payouts by cutting CAPEX and R&D. Driven by an agency/free-cash-flow channel, these commitments discipline liquidity and signal confidence. Ultimately, payout policy serves as a vital tool to manage crash risk, albeit at the expense of long-term investment.

Keywords: Dividends; Payout Policy; Stock Price Crash Risk; Financial Stability; Signaling (search for similar items in EconPapers)
Pages: 78 pages
Date: 2026-05
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2638

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