Declining propensity to pay? A re-examination of the lifecycle theory

Monica L. Banyi, Kathleen M. Kahle

Research output: Contribution to journalArticlepeer-review

23 Scopus citations


Our results indicate that the declining propensity to pay is a function of the changing composition of firms over time and not a declining propensity in individual firms themselves. In particular, the propensity to pay is greater than expected following the 2003 dividend tax cut. The decade a firm went public is also a major determinant of its initial payout policy. Finally, while the strength of the relation between earned/contributed capital and payout propensity declines across IPO decades, there is still a lifecycle effect - within a given IPO cohort, the likelihood of payout increases as firms age.

Original languageEnglish (US)
Pages (from-to)345-366
Number of pages22
JournalJournal of Corporate Finance
StatePublished - Aug 2014


  • Dividends
  • Earned equity
  • Lifecycle theory
  • Payout policy
  • Repurchases

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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