Pay Out Policy | Open Access Journals

Advances in Robotics & Automation

ISSN: 2168-9695

Open Access

Pay Out Policy

The policy which refers to the ways in which firms return capital to their equity investors. Payouts to equity investors take the form of either dividends or share repurchases. The modern study of payout policy is rooted within the irrelevance propositions developed by Nobel Laureates Merton Miller and Franco Modigliani. Miller and Modigliani show that payout policy is irrelevant when capital markets are perfect, when there's no asymmetric information, and when the firm’s investment policy is fixed. In practice, however, it appears that payout policy follows systematic patterns which firm value responds to changes in payout policy in predictable ways. Understanding of payout policy is vital because firms return significant amounts of capital to shareholders within the sort of dividends and share repurchases. The Evidence suggests that there rise in the popularity of repurchases increases overall payout and increases firms’ and financial flexibility.

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