The firm-level and aggregate effects of corporate payout policy

Stylianos Asimakopoulos, Jim Malley and Apostolis Philippopoulos

Journal of International Money and Finance, 2025, vol. 157, issue C

Abstract: This paper presents a novel study on the significance of corporate payout policy in shaping firms’ financial decision-making and, in turn, the macroeconomy. To this end, we add to the literature by allowing households and firms to choose share buybacks optimally. We then explore the implications of various shocks commonly affecting them, such as dividend income, investment, and tax shocks. The latter include corporate income, capital gains, and dividend income taxes. We find that the model predictions cohere well with the data when applying the non-policy shocks. We also find that tax reform’s aggregate and welfare effects are overstated when share buybacks are not optimally chosen as assumed in the relevant literature.

Keywords: Dividends; Share repurchases; Tax reforms; Payout flexibility (search for similar items in EconPapers)
JEL-codes: C68 E62 G30 G35 H25 H30 (search for similar items in EconPapers)
Date: 2025
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Related works:
Working Paper: The Firm-Level and Aggregate Effects of Corporate Payout Policy (2024)
Working Paper: The Firm-level and Aggregate E¤ects of Corporate Payout Policy (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:157:y:2025:i:c:s0261560625001081

DOI: 10.1016/j.jimonfin.2025.103373

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