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:
Journal Article
Journal or Publication Title:
Journal of Finance
Uncontrolled Keywords:
/dk/atira/pure/researchoutput/libraryofcongress/hg
Subjects:
ID Code:
49606
Deposited By:
Deposited On:
07 Sep 2011 14:07
Refereed?:
Yes
Published?:
Published
Last Modified:
08 Jul 2020 02:54