When cutting dividends is not bad news: The case of optional stock dividends (with Pr. Edith Ginglinger) – Journal of Corporate Finance, Forthcoming
We provide evidence on optional stock dividends, a mechanism that allows shareholders to choose between stock dividends and cash dividends. We find that, in contrast to dividend cuts, shareholders do not view this option as bad news. They overwhelmingly approve it at general meetings, with the majority favoring stock dividends over cash dividends. We find that large firms with limited cash holdings and a large institutional ownership are more likely to offer optional stock dividends to their shareholders. These firms are the most committed to paying dividends, and this option provides them financial flexibility by allowing temporary cuts in cash outflows without altering their nominal dividend policy.
Customer Risk and The Choice Between Cash and Bank Credit Lines (last version: Feb. 2020 – available here)
I use a matched buyer-supplier sample of U.S. industrial firms to investigate the impact of customer risk on suppliers’ choice between cash and credit lines. I show that customer risk decreases the reliance on bank-managed liquidity insurance relative to cash. I also find evidence indicating that firms actively shy away from credit lines in response to customer risk in order to maximize the future availability of their liquidity reserves. Consistently, my findings suggest that high-customer-risk firms are particularly more likely to be subject to (stricter) borrowing base provisions, which tie the value of a credit line to that of eligible collateral (notably accounts receivable). I also find that steeper credit line spreads alone cannot explain firms’ response to customer risk. These results highlight how customer-supplier relationships affect the precautionary demand for liquidity, and significantly shape corporate financial decisions.
Work in Progress
The Easy Life of Superstar CEOs: Evidence from Shareholder Proposals and Mutal Fund Voting, with Alberta Di Giuli and Arthur Petit-Romec
Trust and the propagation of shocks along the supply chain, with Jose Martin-Flores)
Is Marriage the key to happiness? The effect of long-term customer-supplier relationships on supplier firms, with Jayant Kale