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- Title
Business strategy, cash holdings, and dividend payouts.
- Authors
Houqe, Muhammad Nurul; Monem, Reza M.; van Zijl, Tony
- Abstract
Business strategy's impact on firm cash holdings and dividend payouts has largely remained unexplored. We identify a fundamental and direct link between a firm's business strategy and its cash holdings and dividend payouts. Analysing two large samples of data on US firms over the period 1992–2017, we find strong evidence that prospectors (defenders) are likely to hold more (less) cash and pay less (more) dividends than other firms. Further analysis suggests that prospectors pay dividends less frequently than do defenders. The results are robust to a battery of robustness checks and additional analysis. Overall, the results suggest that identifying a firm's business strategy significantly helps to understand a firm's cash holdings and dividend payout decisions.
- Subjects
BUSINESS planning; DIVIDENDS; DIVIDEND policy; CASH position of corporations
- Publication
Accounting & Finance, 2023, Vol 63, Issue 4, p3999
- ISSN
0810-5391
- Publication type
Article
- DOI
10.1111/acfi.13082