A Lintner Model of Payout and Managerial Rents
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Myers_A Lintner.pdf
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Author(s)
Lambrecht, Bart M.
Myers, Stewart C.
Date Issued
October 2012
Journal
Journal of Finance
Publisher
John Wiley & Sons, Inc
Citation
LAMBRECHT, BART M., and STEWART C. MYERS. “A Lintner Model of Payout and Managerial Rents.” The Journal of Finance 67, no. 5 (October 2012): 1761–1810.
Version
Author's final manuscript
Abstract
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.
MIT Department
Sloan School of Management
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Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.1111/j.1540-6261.2012.01772.x
