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Are dividends and share repurchases substitutes?: Finance theory suggests that dividends and share repurchases are an equivalent way of distributing funds to shareholders. However, over the past 20 years share repurchase programs have become an important payout method for firms. Do these repurchases serve as substitutes for dividends? And if so, why has it taken so long to start to pay shareholders in a way that reduces their tax liability. In this capstone, review the available theoretical and empirical evidence in order to assess the evolution of dividend payments and repurchase programs. Pay special attention to the question of substitutability of dividends and share repurchases from the point of view of the corporation and the investor: Do firms finance share repurchases with funds that would otherwise have been used to pay dividends? Are investors indifferent between dividends and share repurchases? Do investors react differently to dividend than to share repurchase announcements? Why or why not? - In addition to the literature listed below, make sure that you review at least 3 additional articles of your own choice. For these, please provide correct references.

Allen, Bernardo and Welch (2000). A theory of dividends based on tax clientele. -Journal of Finance, 55 (6), 2499-2536.

Baker and Wurgler (2004). A catering theory of dividends. Journal of Finance 59, 1125-1165.

Bartov (1998). Evidence on how companies choose between dividends and open market share repurchases. Journal of Applied Corporate Finance 11, 89-96.

Brav, Graham, Harvey and Michaely (2003). Payout policy in the 21st century, Journal of Financial Economics 77, 483-527.

Brennan and Thakor (1990). Shareholder Preferences and Dividend Policy, Journal of Finance, 45(4), 993-1019.

DeAngelo, DeAngelo and Skinner (2000). Special dividends and the evolution of dividend signalling. Journal of Financial Economics 57, 309-354.

DeAngelo, DeAngelo and Skinner (2004). Are dividends disappearing? Dividend concentration and the consolidation of earnings. Journal of Financial Economics 72, 425-456.

Fama and French (2001). Disappearing Dividends: Changing firm characteristics or lower propensity to pay? Journal of Financial Economics 60, 3-43.

Haw, Ho, Hu and Zhang (2011). The Contribution of Stock Repurchases to the Value of the Firm and Cash Holdings around the World. Journal of Corporate Finance 17, 152-166.

Hoberg and Prabhala (2009). Disappearing dividends, catering, and risk. Review of Financial Studies 22, 79-116.

Renneboog and Trojanowski (2011). Patterns in Payout Policy and Payout Channel Choice. Journal of Banking and Finance 35, 1477-1490.

Skinner (2008). The evolving relation between earnings, dividends, and stock repurchases. Journal of Financial Economics 87, 582-609.

von Eije and Megginson (2008). Dividends and share repurchases in the European Union. Journal of Financial Economics 89, 347-374.