Institutional investors’ horizon and equity-financed payouts

Wen He, Lin Mi

Research output: Contribution to journalArticleResearchpeer-review


Farre-Mensa, Michaely and Schmalz (2018) document that many firms issue new equity to finance their payouts to shareholders, despite the substantial cost of equity issuance. We find that equity-financed payouts are related to institutional investors’ horizon. Specifically, firms with a larger ownership by short-horizon institutions are more likely to have equity-financed discretionary payouts, and firms with equity-financed discretionary payouts tend to cut down their investments in the following years. Our results suggest that investor short-termism has significant effects on firms’ payout, financing and investment policies.

Original languageEnglish
Article number106324
Number of pages13
JournalJournal of Banking and Finance
Publication statusPublished - Jan 2022


  • Corporate investments
  • Financing policy
  • Institutional investors
  • Payout policy
  • Short-termism

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