Import competition and financial flexibility: Evidence from corporate payout policy

This study examines the impact of import competition on a firm's preference for financial flexibility by examining corporate payout policy. We confirm existing results that firms with greater exposure to import competition are less likely to pay regular dividends and pay less. We extend these results by showing that firms subject to greater import competition are less likely to initiate or increase regular cash dividends, and are more likely to decrease or omit them. Further, we are the first to show that for firms that have a positive cash payout there is a clear preference for the flexible distribution channel when faced with more intense import competition.