What Arguments Drive Swedish Companies in the Choice Between Paying Out Cash Through Dividends and Share Repurchases?

Abstract: The aim of this paper is to examine Swedish companies’ payout policies. First, what arguments drive Swedish companies to leave substantial amounts of money on the table by paying considerable amounts of cash in dividends when share repurchases are more tax beneficial to shareholders? Second, are the arguments rational? An interview study has been carried out covering a significant part of the value of the Stockholm Stock Exchange. On the basis of the interview results, previous research and opinions expressed in media, 10 arguments have been deducted; (1) Tax Irrelevance (2) Speculation (3) Equal Treatment (4) Historical Traditions (5) Lack of Ideas (6) Manipulation of Share Price (7) Lack of Knowledge (8) Share Price Influence on Repurchase Decision (9) Reduction of Shareholder Base and (10) Abuse of Asymmetric Information. The rationality of the arguments have been analysed on the basis of data and logical reasoning. The main findings of the thesis are the stated arguments and the conclusion that they do not seem to be rational explanations.