Maintaining a Flexible Payout Policy in a Mature Industry: The Case of Crown Cork and Seal in the Connelly Era

This study shows the payment of cash dividends is not necessary for successful corporatefinancial management in mature firms. A mature company in a mature industry, theCrown Cork and Seal Company did not pay any common dividends over a 33-yearperiod. Instead, the firm used stock repurchases flexibly to manage the challenges ofdeclining industry growth potential. Crown’s share repurchases increased theproportionate equity stakes of board and management members. The high equityownership of insiders served as a strong signal of management’s confidence in the firm.The result of these policies was a focused acquisition strategy funded by internallygenerated cash that outperformed its peers’ diversification strategies.