Main Article Content
Abstract
Purpose: This study explores the factors influencing a company's decision to choose between dividend payments and share repurchases and their impact on capital structure and shareholder value.
Research Design and Methodology: The study identifies critical themes and trends shaping dividend and share repurchase decisions through a systematic review and analysis of existing literature, incorporating theoretical frameworks and empirical findings. The research methodology emphasizes rigor, transparency, and reflexivity, ensuring the credibility of the conclusions derived from the literature synthesis.
Findings and Discussion: The results show that companies with stable cash flow choose dividends to provide consistent returns to shareholders. In contrast, companies with high growth prospects prefer share buybacks to maintain financial flexibility and increase EPS. Market conditions and investor preferences also play an essential role in this decision.
Implications: This research provides insights for management to adjust the payout policy to market conditions and the company's strategic objectives to optimize shareholder value and maintain financial flexibility.
Novelty: This study's novelty lies in its holistic approach, which combines empirical and theoretical analysis to understand the dynamics between dividend payouts and share buybacks in corporate finance.
Keywords
Article Details
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
- Abraham, R., Harris, J., & Auerbach, J. (2018). Determinants and consequences of share repurchase decisions. Modern Economy, 9(5), 966–979. https://doi.org/10.4236/ME.2018.95061
- Agarwal, S., Li, K., Qin, Y., Wu, J., & Yan, J. (2020). Tax evasion, capital gains taxes, and the housing market. Journal of Public Economics, 188, 104222. https://doi.org/10.2139/SSRN.3241127
- Alfraih, M. M. (2018). The role of corporate governance in intellectual capital disclosure. International Journal of Ethics and Systems, 34(1), 101–121. https://doi.org/10.1108/IJOES-02-2017-0026
- Apergis, N., Chasiotis, I., Georgantopoulos, A. G., & Konstantios, D. (2021). The integration of share repurchases into investment decision-making: Evidence from Japan. International Review of Financial Analysis, 78, 101950. https://doi.org/10.1016/j.irfa.2021.101950
- Bobenhausen, N., Breuer, W., Knetsch, A., & Salzmann, A. J. (2023). Share repurchases, undervaluation, and stakeholder orientation. Undervaluation, and Stakeholder Orientation (April 13, 2023). https://doi.org/10.2139/SSRN.3754283
- Bonaimé, A., & Kahle, K. (2024). Share repurchases. Handbook of Corporate Finance, 176–222. https://doi.org/10.4337/9781800373891
- Busch, P., & Obernberger, S. (2017). Actual share repurchases, price efficiency, and the information content of stock prices. The Review of Financial Studies, 30(1), 324–362.
- Chen, N., & Liu, C. (2021). Share repurchases and market signaling: Evidence from earnings management. International Review of Finance, 21(4), 1203–1224. https://doi.org/10.1111/IRFI.12321
- d’Udekem, B. (2021). Agency Conflicts and Dividend Persistence. Journal of Financial Services Research, 60(2), 207–234. https://doi.org/10.1007/s10693-021-00348-x
- Dewi, M. S. (2023). Integrating Corporate Governance Practices into New Financing Projects and Executive Pay Structures. Advances in Management & Financial Reporting, 1(3 SE-Articles), 145–156. https://doi.org/10.60079/amfr.v1i3.237
- Dhanani, A. (2016). Corporate share repurchases in the UK. Journal of Applied Accounting Research, 17(3), 331–355. https://doi.org/10.1108/JAAR-09-2014-0096
- Farre-Mensa, J., Michaely, R., & Schmalz, M. (2018). Financing payouts. Journal of Financial and Quantitative Analysis, 1–60. https://doi.org/10.1017/S0022109024000231
- Gamage, C. B. (2023). How Do Share Repurchases Affect the Information Implications of Dividends? International Evidence from Share Repurchases Legalization. International Evidence from Share Repurchases Legalization. https://doi.org/10.2139/ssrn.4363996
- Grullon, G., Larkin, Y., & Michaely, R. (2019). Dividend policy and product market competition. Available at SSRN 972221. https://doi.org/10.2139/ssrn.972221
- Haryanto, J. T. (2024). Short-Term Versus Long-Term Portfolio Management Strategies and the Selection of Securities. Advances in Management & Financial Reporting, 2(1), 11–23. https://doi.org/10.60079/amfr.v2i1.247
- Hong, L., & Chao, A. (2018). Strategic corporate social responsibility, sustainable growth, and energy policy in China. Energies, 11(11), 3024. https://doi.org/10.3390/EN11113024
- Kang, J., & Starica, C. (2017). Future Earnings Expectations and Earnings Attributes. https://doi.org/10.2139/SSRN.2900840
- Kowerski, M., & Kaźmierska-Jóźwiak, B. (2022). The proposal of corporate payout decisions’ modelling. Engineering Economics, 33(1), 59–72.
- Kumar, P., & Zattoni, A. (2017). Agency conflicts and corporate governance. In Corporate Governance: An International Review (Vol. 25, Issue 4, pp. 220–221). Wiley Online Library. https://doi.org/10.1111/CORG.12212
- Liang, W. (2016). Sensitivity to investor sentiment and stock performance of open market share repurchases. Journal of Banking & Finance, 71, 75–94. https://doi.org/https://doi.org/10.1016/j.jbankfin.2016.06.003
- Manginte, S. Y. (2024). Fortifying Transparency: Enhancing Corporate Governance through Robust Internal Control Mechanisms. Advances in Management & Financial Reporting, 2(2), 72–84. https://doi.org/10.60079/amfr.v2i2.173
- Mertaniemi, S. (2023). Cash Distribution to Shareholders by Dividends and Share Repurchases–Determining factors in decision-making and valuation effects. https://doi.org/https://urn.fi/URN:NBN:fi:aalto-202310016094
- Nurfadila, N. (2024). Enhancing Public Financial Management through Performance Evaluation and Cost Systems. Advances in Management & Financial Reporting, 2(1), 24–35. https://doi.org/10.60079/amfr.v2i1.264
- Ong, T. S., & Ng, P. S. (2018). The effects of share repurchase announcements on returns in the Malaysia stock market. Indonesian Journal of Business Finance and Accounting, 1(1), 1–19. https://doi.org/10.32455/IJBFA.V1I1.44
- Paul, D. L., Wang, H., Wang, R., & Zhang, F. (2020). Managerial Flexibility Effect and Information Content of Dividend versus Stock Repurchase. Available at SSRN 4154563. https://doi.org/10.2139/ssrn.4154563
- Permata, I. (2023). Insights into Effective Corporate Financial Management Practices and Their Implications. Advances in Management & Financial Reporting, 1(3), 129–144. https://doi.org/10.60079/amfr.v1i3.194
- Salehi, M., Sadegh Adibian, M., Sadatifar, Z., & Khansalar, E. (2021). The relationship between corporate governance characteristics and agency costs. Zbornik Radova Ekonomskog Fakulteta u Rijeci: Časopis Za Ekonomsku Teoriju i Praksu, 39(1), 199–220. https://doi.org/10.18045/ZBEFRI.2021.1.199
- Signori, S., San-Jose, L., Retolaza, J. L., & Rusconi, G. (2021). Stakeholder value creation: Comparing ESG and value added in European companies. Sustainability, 13(3), 1392. https://doi.org/10.3390/su13031392
- Smith, C., Ikenberry, D., Nayar, A., Anda, J., McVey, H., & Stewart, B. (2020). Morgan stanley roundtable on capital structure and payout policy. Journal of Applied Corporate Finance, 32(1), 92–107. https://doi.org/10.1111/jacf.12391
- Smith, D. D. (2021). Payout policy, managerial perquisites, and sticky SG&A costs. Journal of Corporate Accounting & Finance, 32(4), 132–146.
- Wardini, M. E., Anugrah, Y. D. Y., Farid, M., & Laili, A. (2022). Capital Structure and Dividend Policy. Muhasabatuna: Jurnal Akuntansi Syariah, 4(2), 41–46. https://doi.org/10.54471/muhasabatuna.v4i2.2106
- Yasmin, F., & Ferdaous, J. (2023). Behavioral biases affecting investment decisions of capital market investors in Bangladesh: A behavioral finance approach. Investment Management and Financial Innovations, 20(2), 149–159. https://doi.org/10.21511/imfi.20(2).2023.13
References
Abraham, R., Harris, J., & Auerbach, J. (2018). Determinants and consequences of share repurchase decisions. Modern Economy, 9(5), 966–979. https://doi.org/10.4236/ME.2018.95061
Agarwal, S., Li, K., Qin, Y., Wu, J., & Yan, J. (2020). Tax evasion, capital gains taxes, and the housing market. Journal of Public Economics, 188, 104222. https://doi.org/10.2139/SSRN.3241127
Alfraih, M. M. (2018). The role of corporate governance in intellectual capital disclosure. International Journal of Ethics and Systems, 34(1), 101–121. https://doi.org/10.1108/IJOES-02-2017-0026
Apergis, N., Chasiotis, I., Georgantopoulos, A. G., & Konstantios, D. (2021). The integration of share repurchases into investment decision-making: Evidence from Japan. International Review of Financial Analysis, 78, 101950. https://doi.org/10.1016/j.irfa.2021.101950
Bobenhausen, N., Breuer, W., Knetsch, A., & Salzmann, A. J. (2023). Share repurchases, undervaluation, and stakeholder orientation. Undervaluation, and Stakeholder Orientation (April 13, 2023). https://doi.org/10.2139/SSRN.3754283
Bonaimé, A., & Kahle, K. (2024). Share repurchases. Handbook of Corporate Finance, 176–222. https://doi.org/10.4337/9781800373891
Busch, P., & Obernberger, S. (2017). Actual share repurchases, price efficiency, and the information content of stock prices. The Review of Financial Studies, 30(1), 324–362.
Chen, N., & Liu, C. (2021). Share repurchases and market signaling: Evidence from earnings management. International Review of Finance, 21(4), 1203–1224. https://doi.org/10.1111/IRFI.12321
d’Udekem, B. (2021). Agency Conflicts and Dividend Persistence. Journal of Financial Services Research, 60(2), 207–234. https://doi.org/10.1007/s10693-021-00348-x
Dewi, M. S. (2023). Integrating Corporate Governance Practices into New Financing Projects and Executive Pay Structures. Advances in Management & Financial Reporting, 1(3 SE-Articles), 145–156. https://doi.org/10.60079/amfr.v1i3.237
Dhanani, A. (2016). Corporate share repurchases in the UK. Journal of Applied Accounting Research, 17(3), 331–355. https://doi.org/10.1108/JAAR-09-2014-0096
Farre-Mensa, J., Michaely, R., & Schmalz, M. (2018). Financing payouts. Journal of Financial and Quantitative Analysis, 1–60. https://doi.org/10.1017/S0022109024000231
Gamage, C. B. (2023). How Do Share Repurchases Affect the Information Implications of Dividends? International Evidence from Share Repurchases Legalization. International Evidence from Share Repurchases Legalization. https://doi.org/10.2139/ssrn.4363996
Grullon, G., Larkin, Y., & Michaely, R. (2019). Dividend policy and product market competition. Available at SSRN 972221. https://doi.org/10.2139/ssrn.972221
Haryanto, J. T. (2024). Short-Term Versus Long-Term Portfolio Management Strategies and the Selection of Securities. Advances in Management & Financial Reporting, 2(1), 11–23. https://doi.org/10.60079/amfr.v2i1.247
Hong, L., & Chao, A. (2018). Strategic corporate social responsibility, sustainable growth, and energy policy in China. Energies, 11(11), 3024. https://doi.org/10.3390/EN11113024
Kang, J., & Starica, C. (2017). Future Earnings Expectations and Earnings Attributes. https://doi.org/10.2139/SSRN.2900840
Kowerski, M., & Kaźmierska-Jóźwiak, B. (2022). The proposal of corporate payout decisions’ modelling. Engineering Economics, 33(1), 59–72.
Kumar, P., & Zattoni, A. (2017). Agency conflicts and corporate governance. In Corporate Governance: An International Review (Vol. 25, Issue 4, pp. 220–221). Wiley Online Library. https://doi.org/10.1111/CORG.12212
Liang, W. (2016). Sensitivity to investor sentiment and stock performance of open market share repurchases. Journal of Banking & Finance, 71, 75–94. https://doi.org/https://doi.org/10.1016/j.jbankfin.2016.06.003
Manginte, S. Y. (2024). Fortifying Transparency: Enhancing Corporate Governance through Robust Internal Control Mechanisms. Advances in Management & Financial Reporting, 2(2), 72–84. https://doi.org/10.60079/amfr.v2i2.173
Mertaniemi, S. (2023). Cash Distribution to Shareholders by Dividends and Share Repurchases–Determining factors in decision-making and valuation effects. https://doi.org/https://urn.fi/URN:NBN:fi:aalto-202310016094
Nurfadila, N. (2024). Enhancing Public Financial Management through Performance Evaluation and Cost Systems. Advances in Management & Financial Reporting, 2(1), 24–35. https://doi.org/10.60079/amfr.v2i1.264
Ong, T. S., & Ng, P. S. (2018). The effects of share repurchase announcements on returns in the Malaysia stock market. Indonesian Journal of Business Finance and Accounting, 1(1), 1–19. https://doi.org/10.32455/IJBFA.V1I1.44
Paul, D. L., Wang, H., Wang, R., & Zhang, F. (2020). Managerial Flexibility Effect and Information Content of Dividend versus Stock Repurchase. Available at SSRN 4154563. https://doi.org/10.2139/ssrn.4154563
Permata, I. (2023). Insights into Effective Corporate Financial Management Practices and Their Implications. Advances in Management & Financial Reporting, 1(3), 129–144. https://doi.org/10.60079/amfr.v1i3.194
Salehi, M., Sadegh Adibian, M., Sadatifar, Z., & Khansalar, E. (2021). The relationship between corporate governance characteristics and agency costs. Zbornik Radova Ekonomskog Fakulteta u Rijeci: Časopis Za Ekonomsku Teoriju i Praksu, 39(1), 199–220. https://doi.org/10.18045/ZBEFRI.2021.1.199
Signori, S., San-Jose, L., Retolaza, J. L., & Rusconi, G. (2021). Stakeholder value creation: Comparing ESG and value added in European companies. Sustainability, 13(3), 1392. https://doi.org/10.3390/su13031392
Smith, C., Ikenberry, D., Nayar, A., Anda, J., McVey, H., & Stewart, B. (2020). Morgan stanley roundtable on capital structure and payout policy. Journal of Applied Corporate Finance, 32(1), 92–107. https://doi.org/10.1111/jacf.12391
Smith, D. D. (2021). Payout policy, managerial perquisites, and sticky SG&A costs. Journal of Corporate Accounting & Finance, 32(4), 132–146.
Wardini, M. E., Anugrah, Y. D. Y., Farid, M., & Laili, A. (2022). Capital Structure and Dividend Policy. Muhasabatuna: Jurnal Akuntansi Syariah, 4(2), 41–46. https://doi.org/10.54471/muhasabatuna.v4i2.2106
Yasmin, F., & Ferdaous, J. (2023). Behavioral biases affecting investment decisions of capital market investors in Bangladesh: A behavioral finance approach. Investment Management and Financial Innovations, 20(2), 149–159. https://doi.org/10.21511/imfi.20(2).2023.13