Accounting Disclosures and Corporate Payout Policy: Special Dividends versus Stock Repurchases

Abstract

This study examines whether the choice of stock repurchases versus special dividends for one-time cash distributions is related to the level of a firm's accounting disclosures. The results indicate that firms providing more informative accounting disclosures are more likely to announce stock repurchase programs as a means for one-time cash distributions. In contrast, firms that provide less informative accounting disclosures tend to rely on special dividends for one-time cash distributions. These findings are consistent with prior studies that argue that information costs associated with stock repurchases limit their use as a payout method.