2006 Headlines
Roni Michaely, Rudd Family Professor of Management and Professor Finance, Garners Top Research Award from Scholarly PeersPrestigious Jensen Prize Awarded for Research on Corporate Payout One of the finance disciplines top honors for scholarly research recently was earned by the Johnson School's Roni Michaely, Rudd Family Professor of Management and Professor of Finance. The prestigious Jensen Prize for the best research in corporate finance and organizations published the previous year in the Journal of Financial Economics went to Michaely and his co-authors for their paper "Payout Policy in the 21st Century." Winners are elected by vote of subscribers to the journal. Payout, or the way corporations distribute excess cash to investors, long has been a top research interest of finance scholars, particularly payout in the form of dividends. Michaely's research is the first empirical study in more than 50 years to explore how managers determine dividend policy. One aspect of the paper that is relevant both to scholars and investors is how the May 2003 reduction in income tax affect managers' attitude towards payouts and dividends. "While most empirical research uses archival data exclusively, we are able to combine manager's responses with archival data. The design of our work benefited from theoretical and empirical work done over the past 40 years in the area of payout," Michaely says. "With this approach, we were able to shed light on attitudes toward and behaviors affecting payout from a different perspective." A major finding of the study is how strongly managers prefer the flexibility of share repurchase as a payout method relative to dividends. More than six in ten managers told the researchers that they would opt for share repurchases exclusively, if hypothetically paying out for the first time. "Repurchases are more flexible than dividends-they allow managers to invest more when needed, and repurchase less, and vice-versa," Michaely says. In contrast, managers know that once dividends are established, the market punishes their company's stock, if dividends are reduced. "Managers would rather cut off their right arm than cut dividends," Michaely says. Michaely's other research awards include best paper published in the Journal of Finance in 2000, and the 1999 best paper award from the Review of Financial Studies. This is his first best-paper honor from the Journal of Financial Economics. "We all have the desire to affect how people view certain things," Michaely says. "We try to gain new knowledge and distribute that knowledge to our peers and students-from this perspective, receiving this award is very satisfying." "Payout Policy in the 21st Century" appeared in the September 2005 issue of the Journal of Financial Economics. The complete paper is available on the Johnson School's web site. Cornell Enterprise, the Johnson School's alumni magazine, wrote about Michaely's research in its spring 2004 issue. Michaely co-authored the paper with Alon Brav, John Graham and Cam Harvey, all of Duke University. For More Information |
