Abstract
During their life firms face the constant decision of whether or not to distribute cash among their shareholders and to what extent to do so. There are two main methods for redistributing cash to the shareholders: dividends and share repurchases. Through dividends, a fraction of earnings is paid out as direct income to the shareholders according to the capital rights of the shares. Share repurchases, on the other hand, is a process in which a proportion of a company's outstanding shares is repurchased. In this paper we aim to analyze four important factors which influence the payout decision. These are, the tax influence, the life-cycle stage of a firm, the choice between share repurchase and dividend payout, and the influence of investment opportunities.
