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A Litner Model of Payout and Managerial Rents / Bart M. Lambrecht, Stewart C. Myers.
- Format:
- Book
- Author/Creator:
- Lambrecht, Bart M.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w16210.
- NBER working paper series no. w16210
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2010.
- Summary:
- We develop a dynamic agency model where 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 in order 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.
- Notes:
- Print version record
- July 2010.
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