N°26-38: Corporate Payout Policy and Bad-News Hoarding

We investigate how G7-listed firms (2000–2023) adjust payout policies when facing stock price crash risk, which proxies for investor concerns about bad-news hoarding. Exposed firms increase dividends and repurchases to reassure investors, shifting their payout mix toward dividends given their stronger commitment value. However, these stabilizing payouts entail real economic costs: under high crash risk, firms, especially smaller ones, fund payouts by cutting CAPEX and R&D. Driven by an agency/free-cash-flow channel, these commitments discipline liquidity and signal confidence. Ultimately, payout policy serves as a vital tool to manage crash risk, albeit at the expense of long-term investment.