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Asset redeployability and dividend payout policy

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  • Ouyang, Puman
  • Zhong, Ligang

Abstract

This research examines the effects of real asset redeployability on dividend payout policy, showing that firms with higher real asset redeployability tend to pay more dividends. Our results hold after controlling for cash holdings, current assets, and other firm characteristics. We hypothesize that asset redeployability increases dividend payout through the financial constraint channel, the signaling channel and the agency problem channel. Our empirical results suggest that all three channels are at play and that the positive effect is more pronounced for firms with more severe financial constraints, stronger signaling incentives, and for firms that have more severe free cash flow problems. Overall, our findings imply that asset redeployability is an important determinant of corporate dividend payout policy.

Suggested Citation

  • Ouyang, Puman & Zhong, Ligang, 2023. "Asset redeployability and dividend payout policy," The Quarterly Review of Economics and Finance, Elsevier, vol. 90(C), pages 91-105.
    • Handle: RePEc:eee:quaeco:v:90:y:2023:i:c:p:91-105
    DOI: 10.1016/j.qref.2023.05.005
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    More about this item

    Keywords

    Dividend policy; Asset redeployability; Financial constraints; Free cash flow problems; Signaling effect;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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