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A Lintner Model of Payout and Managerial Rents

The Journal of finance (New York), 2012-10, Vol.67 (5), p.1761-1810 [Peer Reviewed Journal]

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Title:
A Lintner Model of Payout and Managerial Rents
Author: LAMBRECHT, BART M. ; MYERS, STEWART C.
Subjects: Agency theory ; Business structures ; Capital management ; Capital market ; Capital markets ; Cash ; Debt ; Dividends ; Economic rent ; Financial investments ; Financial management ; Financial planning ; Income ; Investment ; Investment advisors ; Investment policy ; Investment strategies ; Investors ; Pay-off ; Risk aversion ; Shareholders ; Studies
Is Part Of: The Journal of finance (New York), 2012-10, Vol.67 (5), p.1761-1810
Description: 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.
Publisher: Malden, USA: Blackwell Publishing Inc
Language: English
Identifier: ISSN: 0022-1082
EISSN: 1540-6261
DOI: 10.1111/j.1540-6261.2012.01772.x
CODEN: JLFIAN
Source: Alma/SFX Local Collection

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