Issues and Payouts: Changes in Capital Structure

Dirk Schoenmaker and Willem Schramade
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Willem Schramade: Nyenrode Business University

Chapter 16 in Corporate Finance for Long-Term Value, 2023, pp 463-495 from Springer

Abstract: Abstract Companies can change the composition of their capital structure by adding (issuing) or reducing (paying out) types of funding. In issues, cash is raised from providers of capital and their claim is increased accordingly. Conversely, payouts refer to those situations in which cash is paid to providers of capital and the value of their claim is reduced accordingly. Both issues and payouts compete with alternative uses of corporate cash, such as investments and building cash reserves. The impact of environmental (E) and social (S) factors on financial issues and payouts is most obvious through their impact on business models and operations, which in turn affect risk, debt capacity, and cash flows, thereby affecting the degree to which companies can and want to payout cash or issue new capital. As for issues and payouts of E and S themselves, the question is if they exist at all. After all, issues and payouts concern changes in claims that involve cash transfers, but it is not clear what the equivalent of cash could be in E and S. Still, an integrated view on issues and payouts makes sense: given that E and S liabilities affect integrated leverage, they are likely to have implications for integrated payouts as well. The question then is: how to manage issues and payouts, financial in nature, when managing for long-term value? It calls for caution on payouts in the presence of significant liabilities on E or S.

Keywords: Adjusted present value (APV); Buyback; Catering; Capital structure; Cash; Cash reserves; Claims; Dividend; Dividend capture theory; Dividend ratio; Hedonic editing; Integrated payout ratio; Integrated view on issues and payouts; IPO; Issues; Open market share repurchases; Payouts; Payout ratio; Providers of capital; Repurchase; SEO; Share buyback; Special dividend; Stock split; Syndicate; Tax clientele effects; Tender offer; Underwriting (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/978-3-031-35009-2_16

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