FINANCIAL POLICY, INTERNAL CONTROL, AND PERFORMANCE SEALED-AIR-CORPORATIONS LEVERAGED SPECIAL DIVIDEND

This paper examines the role of financial policy as a catalyst for org anizational change. The subject is Sealed Air Corporation, a company w ith substantial free cash flow that undertakes a leveraged special div idend. While the stock price response to announcement is typical, Seal ed Air exhibits dramatic, sustained, post-dividend performance improve ment. Evidence indicates this performance results from managers' consc ious and successful use of financial leverage as a tool to disrupt the status quo and promote internal change, including establishing a new objective, changing compensation systems, and reorganizing manufacturi ng and capital budgeting processes.