Institutional Investors and Payout Policy Trends
Ricky W. Scott.

Abstract
This paper seeks to determine if institutional investors influence corporate payout policies. Specifically, this study tests whether institutional investors contribute to a growth in stock repurchases as a percentage of total payout. Firm and year fixed effect regressions and difference-GMM regressions examining the effect of changes in institutional investor levels to subsequent changes in dividend, stock repurchase, and total payout levels are used. An increase in institutional ownership leads to an increase in the proportion of total payout going towards repurchases and consequently a decrease in the proportion of payout going towards dividends. The rise in institutional ownership of corporations appears to be one of the causes of the rising preference for using stock repurchases as a means of shareholder payout. The results in this paper indicate that institutional shareholders are a significant impetus behind the growing preference of U.S. corporations for using repurchases as a payout method.

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