Internal capital market inefficiencies, shareholder payout, and abnormal leverage

- We examine internal capital market inefficiencies and U.S. multinational firms' return of capital to shareholders.
- The relation between cash and shareholder payouts differs between cash held domestically or by foreign subsidiaries.
- The relation between foreign cash and total payout is negative for weak financial-health firms.
- However, the relation between foreign cash and total payout is positive when access to external capital is less costly.
- Firms with foreign cash and shareholder payouts have abnormal amounts of leverage.