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Title: Irregular payouts of excess cash in UK listed firms
Author: He, Meng
ISNI:       0000 0004 6421 8906
Awarding Body: Lancaster University
Current Institution: Lancaster University
Date of Award: 2015
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This thesis focuses on irregular payouts as a flexible tool in distributing excess cash in UK listed companies. This thesis is comprised of three studies: the first study investigates the intervening effect of defined benefit (DB) pension schemes on irregular payouts of excess cash. The evidence indicates that the existence of DB schemes lowers both the propensity and the magnitude of excess cash distributed to shareholders. The extent to which defined benefit pension schemes affect irregular payouts is conditional on the characteristics of excess cash, where irregular payouts of less (more) transitory excess cash flows are more (less) likely to be affected. Evidence that more transitory excess cash flows will be paid to shareholders rather than being used to fund DB schemes justifies the Pension Regulator’s concern of the conflicts between pension contribution and corporate payouts. Further study reveals that DB schemes also help to limit the scope of over-investment of excess cash. In the second study, I investigate firms’ excess cash policy during the financial crisis period (2008-2011) by focusing on the distribution and the valuation of excess cash during the crisis period. Findings reveal that investors attached a lower discount to excess cash during the crisis period. Consequently, the positive association between irregular payouts and excess cash is significantly weakened during the crisis period. Further analysis suggests that investors place more emphasis on the benefits rather than the costs of excess cash during the crisis period. Moreover, firms retaining excess cash under the precautionary motive during the crisis period do not seem to have typical agency problems such as under-performance or over-investments, during the post-crisis period. In the third study, I investigate the flexibility of share repurchases by examining market reactions towards repurchase reduction decisions. In contrast to the conventional view that cutting repurchases is costless, I document significantly negative abnormal returns when firms announce a repurchase reduction decision. While there is only weak evidence that such reactions differ by announcement type, there is strong evidence that investors’ reactions do differ according to the justifications offered.
Supervisor: Young, Steven Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available