UIC Business Professor Joan Farre-Mensa Wins Sharpe Award for Influential Financial Research
Award-winning paper “Financing Payouts” challenges conventional thinking on how firms fund shareholder distributions and manage capital structure.
UIC Business Professor Joan Farre-Mensa Wins Prestigious Sharpe Award for Financial Research
Joan Farre-Mensa, associate professor of finance, interim head of the Department of Finance, and Bielinski Family Faculty Scholar at UIC Business, has been awarded the 2025 William F. Sharpe Award for Scholarship in Financial Research—one of the most prestigious honors in financial economics. Presented annually by the Journal of Financial and Quantitative Analysis (JFQA), the award honors the best article published in the journal that year and recognizes research that advances understanding in financial economics.
Named in honor of Nobel Prize-winning economist William F. Sharpe, the award reflects his foundational contributions to modern finance, including the Capital Asset Pricing Model (CAPM) and the Sharpe Ratio.
Farre-Mensa received the award alongside coauthors Roni Michaely (University of Hong Kong) and Martin Schmalz (University of Oxford) for their paper, “Financing Payouts,” published in the journal.
Rethinking How Firms Fund Payouts
The study challenges conventional views of how companies fund payouts to shareholders, such as dividends and share repurchases. Traditional finance theory suggests that firms fund shareholder payouts using internally generated cash, distributing excess funds only after meeting their investment needs.
However, the research finds that many firms instead raise external capital—often at the same time they make payouts—challenging this long-standing assumption. The authors find that 43% of firms making payouts also raise capital in the same year, and 31% of total payout dollars are financed externally, primarily through debt.
Drawing on data from more than 11,000 firms over three decades, the authors show that payout decisions are often made independently of internal cash flow, reflecting a more complex relationship between financing and distribution policies than previously understood.
These findings have important implications for how scholars and practitioners understand firm behavior, particularly regarding capital structure and financial flexibility. Rather than simply distributing excess cash, firms appear to use payout policies as part of broader strategic financial decision-making—reshaping how they balance investment, financing, and shareholder returns.
Advancing Financial Economics
The William F. Sharpe Award highlights the impact of UIC Business faculty research in advancing corporate finance and financial economics. Its selection as the most influential article published in the Journal of Financial and Quantitative Analysis in 2025 reflects its significance in shaping the understanding of firm financing and payout behavior.
By challenging long-standing assumptions about how firms fund shareholder distributions, the research offers a new perspective on capital allocation decisions—one that has implications for both academic research and financial practice.
Editorial Leadership in the Field
In addition to the Sharpe Award, Joan Farre-Mensa has been named one of the “Best Associate Editors” by the Journal of Corporate Finance as part of its 2025 annual awards.
This distinction reflects Professor Farre-Mensa’s outstanding contributions to the journal’s editorial process, including his leadership in managing the peer review process and helping ensure the publication of high-quality, impactful research in corporate finance. The award reflects both the rigor of his editorial standards and his commitment to advancing the field.
The Journal of Corporate Finance is one of the leading academic journals in finance, publishing cutting-edge research on corporate financial decision-making, governance, and innovation. Recognition as a top associate editor places Professor Farre-Mensa among a select group of scholars who play a critical role in shaping the direction of research in the discipline.
This honor further underscores the growing prominence of UIC Business in finance research and its commitment to excellence in both scholarship and academic service.
About the Journal of Financial and Quantitative Analysis
The Journal of Financial and Quantitative Analysis is a premier finance journal included in the Financial Times 50 (FT50) list, widely recognized for high-quality research in financial economics. It has an acceptance rate of 6%.