Managerial Flexibility Effect And Information Content Of Dividend Versus Stock Repurchase

The role of interaction between dividend policy and corporation value has received considerable critical attention across a number of disciplines in a wide range of field of modern corporation dividend policy.In the last few decade,there has been a dramatic increase in relevant literature which conducted a large amount of theoretical exploration and empirical research on dividend policies of publicly traded corporation around the world by using different empirical research methods from different research perspectives.Although different schools of corporate financial theories have their own limitations in explaining link between dividend policy and corporation value,they have formed a relatively systematic theoretical system.There is a growing body of literature that highlight the importance of determining the impacts of dividend policy on corporation value for standardizing the dividend distribution behavior of publicly traded corporation,improving corporate governance efficiency,promoting publicly traded corporation vigorous development and achieving economic equilibrium growth.This paper proposes an innovative approach to investigate the factors that determine corporate dividend policies and financial decisions from the perspective of managerial flexibility.We measure the growth and the patterns of stock repurchases and dividends are used by publicly traded U.S.firms in the 1983-2018 period.In particular,we find stock repurchases have the characteristics of dynamic adjustment compared to cash dividends.We examine the determinants and information content of dividend and repurchase.We find evidence supportive of managerial flexibility effect of stock repurchase in time-series and cross-section tests.Our evidences show that the static tradeoff model and the pecking order model can explain the stock repurchase behavior of publicly traded U.S.firms.