Dividends versus Stock Repurchases and Long-Run Stock Returns under Heterogeneous Beliefs

Onur Bayar, Thomas J. Chemmanur, Mark H. Liu

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


We analyze a firm’s choice between dividends and stock repurchases under heterogeneous beliefs. Firm insiders, owning a certain fraction of equity, choose between paying out cash available through a dividend payment or a stock repurchase, and simultaneously choose the scale of the firm’s project. Outsiders have heterogeneous beliefs about project success and may disagree with insiders. In equilibrium, the firm distributes value through dividends alone, through a repurchase alone, or through a combination of both. In some situations, the firm may raise external financing to fund its payout. We also develop results for long-run stock returns following dividends and repurchases. (JEL G32, G35) Received June 2, 2020; editorial decision November 3, 2020 by Editor Andrew Ellul. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Original languageEnglish
Pages (from-to)578-632
Number of pages55
JournalReview of Corporate Finance Studies
Issue number3
StatePublished - Sep 1 2021

Bibliographical note

Publisher Copyright:
© The Author(s) 2021. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved.

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics


Dive into the research topics of 'Dividends versus Stock Repurchases and Long-Run Stock Returns under Heterogeneous Beliefs'. Together they form a unique fingerprint.

Cite this