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A Lintner Model of Payout and Managerial Rents

Lambrecht, Bart and Myers, Stewart C (2012) A Lintner Model of Payout and Managerial Rents. Journal of Finance, 67 (5). pp. 1761-1810. ISSN 0022-1082

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Abstract

We develop a dynamic agency model in which payout, investment, and financing decisions are made by managers who attempt to maximize the rents they take from the firm, subject to a capital market constraint. Managers smooth payout to smooth their flow of rents. Total payout (dividends plus net repurchases) follows Lintner’s (1956) target adjustment model. Payout smooths out transitory shocks to current income and adjusts gradually to changes in permanent income. Smoothing is accomplished by borrowing or lending. Payout is not cut back to finance capital investment. Risk aversion causes managers to underinvest, but habit formation mitigates the degree of underinvestment.

Item Type: Article
Journal or Publication Title: Journal of Finance
Subjects: H Social Sciences > HG Finance
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 49606
Deposited By: ep_importer_pure
Deposited On: 07 Sep 2011 15:07
Refereed?: Yes
Published?: Published
Last Modified: 09 Apr 2014 22:40
Identification Number:
URI: http://eprints.lancs.ac.uk/id/eprint/49606

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