Payout policy of Start-up firms

Abstract

　This study provides preliminary empirical evidence on the payout policies of start-up firms listed in Japan, relying largely on univariate analyses. Although start-ups are generally considered reluctant to distribute cash to shareholders due to abundant investment opportunities, the results show that a non-negligible number of start-ups initiate payouts. Focusing on the first payout in a firm’s history, we find that start-ups experience a significant increase in maturity from a firm life cycle perspective. The analysis also provides evidence consistent with excess cash holdings and subsequent improvements in future performance. In contrast, factors related to information asymmetry and equity undervaluation do not significantly explain the initiation of payouts. Overall, these findings suggest that first payout decisions of start-up firms reflect a transition point in the firm life cycle.