Amount Of Dividends Research Articles

The Revealed Preference of Regulatory Menus: Evidence from the Pre‐Nationalisation British Gas Industry

Prior to nationalisation British gas undertakings were faced with a choice of three different regulatory schemes linking the price charged for gas with the amount of dividend that could be paid. The three schemes, the maximum price system, the sliding scale and the basic price system possessed varying incentive properties. This paper investigates, empirically, the characteristics of firms under each regime. The multinomial logit results suggest that larger firms with lower unit costs were more likely to opt for regulatory options with more powerful incentive mechanisms.

Dividend Policy in the European Union

Using a unique database of over 3400 listed industrial companies, we examine the evolution of dividend policy from 1989 to 2003 in the fifteen nations that were members of the European Union in May 2004. As in the United States, the fraction of European firms paying dividends declines dramatically over this period, from 91 to 62 percent of listed companies, while total real dividends paid and dividend payments as a fraction of total corporate profits increase significantly. Dividends and earnings are concentrating as sharply among European as among American companies, and similar company characteristics like size, profitability, and firm age increase both the propensity to pay dividends and the amount of dividends paid. Asset growth rate, leverage and being headquartered in a civil law country reduce dividend amounts and propensities to pay, but we find neither systematic dividend catering effects in Europe nor conclusive evidence of continent-wide convergence in dividend policy.

The maximum surplus before ruin in an Erlang( n) risk process and related problems

We study the distribution of the maximum surplus before ruin in a Sparre Andersen risk process with the inter-claim times being Erlang( n) distributed. This distribution can be analyzed through the probability that the surplus process attains a given level from the initial surplus without first falling below zero. This probability, viewed as a function of the initial surplus and the given level, satisfies a homogeneous integro-differential equation with certain boundary conditions. Its solution can be expressed as a linear combination of n linearly independent particular solutions of the homogeneous integro-differential equation. Explicit results are obtained when the individual claim amounts are rationally distributed. When n = 2 , all the results can be expressed explicitly in terms of the non-ruin probability. We apply our results by looking at (i) the maximum severity of ruin and (ii) the distribution of the amount of dividends under a constant dividend barrier.

PENGARUH DIVIDEN TUNAI DAN UKURAN PERUSAHAAN PADA INDUSTRI MANUFAKTUR TERHADAP PERILAKU INVESTOR

The aim o f this research is to identify the relationship between the decision about how often the investor doing the transaction (transaction frequency) on a company share with the amount of cash dividend, using proxy dividend per share and dividend yield, and the size o f company with the differences in manufacturing industry sector as a control variabel. This research using logit model. The result for dividend cash variabel is not supporting the hypothesis. The result is the lower the dividend per share, the more frequently investor to do the transaction. For the size o f the company, the result is supporting the hypothesis, that is the probability o f investor to do the transaction is higher in a company with higher capitalization value. The difference sector between manufacturing industry also influence the in­ vestor frequency in doing the transaction. The investor in consumables goods and chemistry of manufacturing industry have more opportunity to do the transaction more frequently.

CLASSICAL AND IMPULSE STOCHASTIC CONTROL FOR THE OPTIMIZATION OF THE DIVIDEND AND RISK POLICIES OF AN INSURANCE FIRM

This paper deals with the dividend optimization problem for a financial or an insurance entity which can control its business activities, simultaneously reducing the risk and potential profits. It also controls the timing and the amount of dividends paid out to the shareholders. The objective of the corporation is to maximize the expected total discounted dividends paid out until the time of bankruptcy. Due to the presence of a fixed transaction cost, the resulting mathematical problem becomes a mixed classical‐impulse stochastic control problem. The analytical part of the solution to this problem is reduced to quasivariational inequalities for a second‐order nonlinear differential equation. We solve this problem explicitly and construct the value function together with the optimal policy. We also compute the expected time between dividend payments under the optimal policy.

The win-first probability under interest force

In a classical risk model under constant interest force, we study the probability that the surplus of an insurance company reaches an upper barrier before a lower barrier. We define this probability as win-first probability. Borrowing ideas from life-insurance theory, hazard rates of the maximum of the surplus before ruin, regarded as a remaining future lifetime random variable, are studied, and provide an original derivation of the win-first probability. We propose an algorithm to efficiently compute this risk-return indicator and its derivatives in the general case, as well as bounds of these quantities. The efficiency of the proposed algorithm is compared with adaptations of other existing methods, and its interest is illustrated by the computation of the expected amount of dividends paid until ruin in a risk model with a dividend barrier strategy.

The expected time to ruin in a risk process with constant barrier via martingales

Two risk models with a constant dividend barrier are considered. In the two models claims arrive according to a Poisson process. In the first model the claim size has a phase type distribution. In the second model the claim size is exponentially distributed, but the arrival rate, the mean claim size, and the premium rate are governed by a random environment, which changes according to a Markov process. Kella and Whitt [Kella, O., Whitt, W., 1992. Useful martingales for stochastic storage processes with Lévy input. J. Appl. Probability 29, 396–403] martingale is applied in the first model. Asmussen and Kella [Asmussen, S., Kella, O., 2000. A multi-dimensional martingale for Markov additive processes and its applications. Adv. Appl. Probability 32, 376–393] multi-dimensional martingale is applied in the second model. The expected time to ruin and the amount of dividends paid until ruin occurs are obtained for both models.

External Financing and Financing Constraints

We look at how firms conduct external financing policies under financing constraints. Rather than focusing on leverage ratios to understand debt and equity issuance decisions, we look at the substitution effect between internal and external financing in the firm's investment optimization problem. In the absence of capital market frictions, firms are able to find financing for all positive NPV projects. In this case, there exists a strong negative relation between operating cash flows and the demand for new external financing when firms prefer using internal funds to invest. When firms face costly access to external funds, however, the optimal, endogenous response of investment to income shocks causes the external-internal funding substitution effect to be strictly weaker (or even disappear). We use data from US firms over the 1971-2001 period to test these predictions. Our tests show that the sensitivity of external financing to cash flow innovations is negative and significant for firms typically regarded as financially unconstrained (those that distribute large amounts of cash dividends, are large in size, and whose bonds and commercial papers are rated). In contrast, external-internal financing sensitivities are insignificant for constrained firms. Importantly, our results indicate that these patterns hold separately for both debt and equity financing. We also find that differences in external-internal financing sensitivities across constrained and unconstrained firms are magnified in the aftermath of macroeconomic movements that tighten financial constraints, such as economic downturns. Our evidence suggests that investment funding constraints have first-order cross-sectional and inter-temporal effects on firm financing decisions, effects that have been overlooked by the capital structure literature.

Are Ex-day Dividend Clientele Effects Dead? Dividend Yield verses Dividend Size

We document new evidence that the ex-dividend day stock price behavior in the U.S. is inconsistent with the tax explanation in several aspects. We find that within a tick multiple, as dividend size increases, dividend yields increase, but the price-drop-to-dividend ratios decrease. For dividends that are less than a tick, there is no relation between price-drop-to-dividend ratio and dividend yield, and for dividends that are less than half a tick, the average price drop is larger than dividend amount. These facts contradict the tax explanation of the ex-dividend day phenomenon. But these patterns are qualitatively consistent with Dubofsky's argument that the exchange rules on how to adjust the prices in the existing limit orders affect ex-day price drop behavior. The positive relation between the price-drop-to-dividend ratio and dividend yield is more pronounced as dividend size increases. We point out this is also qualitatively consistent with Dubofsky.

The Effect of Dividend Tax Relief on Investment Incentives

Reducing the double tax on corporate income has an ambiguous effect on marginal effective tax rates. It depends on the specifics of the policy, the extent of debt finance, whether one adopts the new or the old view of dividend taxes, the identity of the marginal investor, the importance of international capital flows, and the replacement tax regime. We illustrate or discuss each of these sources of ambiguity. We also model the excludable dividend amount (EDA), a feature of the President's dividend tax proposal, and we calculate the marginal effective tax rate for the 5/15 dividend and capital gains tax relief proposal that has become law.

Harmonization of international taxation: the case of interlisted stocks

The fact that stocks going ex‐dividend decline in price by less than the dividend amount is theoretically attributed to the differential taxation of dividend and capital gains or the differential taxation of investor groups. NYSE, Amex and Toronto Stock Exchange listed stocks, and stocks interlisted on these three exchanges, are examined to infer the tax jurisdiction of the marginal investor. The stock price changes relative to the dividends are consistent with a tax clientele effect. Further, the stock price changes are plausible given the tax rates. Ex‐dividend day behavior is different for non‐interlisted stocks on all three exchanges, suggesting each exchange has a different tax clientele. Canadian firms interlisted on US exchanges exhibit ex‐dividend day behavior consistent with the appropriate US exchange’s non‐interlisted stocks, suggesting that the marginal investors in these stocks are American.

Order Imbalance on Ex‐Dividend Days

AbstractIn this article we test an alternative to the tax‐based explanation for why prices decline on ex‐dividend days by an amount less than the dividend. We examine whether there is order imbalance on cum‐ and ex‐dividend days. We find that on ex‐dividend days, there are more buys than sells in the number of orders, but not in the number of shares ordered, and the imbalance in the number of orders is limited to small orders. We find that the difference between the dividend amount and the ex‐dividend‐day price drop is significantly related to the magnitude of the buy‐sell order imbalance. We find no order imbalance on cum‐dividend days in either the number of orders or the number of shares ordered.

European Option Pricing with Discrete Stochastic Dividends

The original Black-Scholes model prices options on a non-dividend paying stock, but of course, most actual stocks pay dividends. The two standard ways of adjusting for dividends are either to assume future dividends are known with certainty and subtract their present value from the current stock price, or to assume the dividend is paid continuously as a constant proportion of the stock price (making the dividend amount stochastic). This article shows that even when dividends are discrete and stochastic, the first type of dividend correction can still work. The key is that the current market values of the stochastic future dividends must be subtracted from the initial stock price. Chance, Kumar, and Rich then discuss ways in which the necessary market values might be obtained.

The Effect of the Nineties' Tax Reforms on the Shareholders' Remuneration Policies Implemented by the Italian Unlisted Firms

The amount and timing of dividends distributed to firms' shareholders are strategic decisions undertaken by managers of listed corporations. Unlisted firms are characterized by having their ownership performing, in most of the cases, the managerial function; the distribution of dividends often represents an occasional destination of the residual profits following the internal financing of the firm's growth. The size of the payout ratio is also related to the shareholders' preferences concerning their income stream. They crucially depend on how alternative methods of income distribution are subject to taxation. The Italian tax system, up to the early nineties', was clearly in favour of dividend distribution with respect to profit retention by the firm. This was a serious problem for medium and small firms with an ambitious target of expansion. Bank financing, the only source of financing effectively available to those firms, was extremely expensive. This paper extends the model proposed by Dessy (1994) by analysing the impact of the tax reforms realized in Italy during the nineties' on the preferences of the firm-shareholders in terms of the remuneration policies implemented by the unlisted corporations. Our numerical results clearly show that those reforms went into the right direction of encouraging profit retention by the firms and their consequent expansion. A positive side-effect related to such a phenomenon has been the growth of the Italian stock market.

Instability in the dividend policy of the Istanbul Stock Exchange (ISE) corporations: evidence from an emerging market

Dividend policy behaviour of corporations operating in emerging markets is significantly different from the widely accepted dividend policy behaviour of corporations operating in developed markets. This study provides evidence from the Istanbul Stock Exchange (ISE), an emerging European stock market, and analyses empirically whether the ISE corporations follow stable cash dividend policies in a regulatory environment that imposed mandatory dividend policies. Unlike the empirical results supporting the stable dividend policy behaviour of corporations operating in developed markets, the empirical results show that the ISE corporations follow unstable cash dividend policies and the main factor that determines the amount of cash dividends is the earnings of the corporation in that year.

Optimal Risk/Dividend Distribution Control Models: Applications to Insurance

The current paper presents a short survey of stochastic models of risk control and dividend optimization techniques for a financial corporation. While being close to consumption/investment models of Mathematical Finance, dividend optimization models possess special features which do not allow them to be treated as a particular case of consumption/investment models. In a typical model of this sort, in the absence of control, the reserve (surplus) process, which represents the liquid assets of the company, is governed by a Brownian motion with constant drift and diffusion coefficient. This is a limiting case of the classical Cramer-Lundberg model in which the reserve is a compound Poisson process, amended by a linear term, representing a constant influx of the insurance premiums. Risk control action corresponds to reinsuring part of the claims the cedent is required to pay simultaneously diverting part of the premiums to a reinsurance company. This translates into controlling the drift and the diffusion coefficient of the approximating process. The dividend distribution policy consists of choosing the times and the amounts of dividends to be paid put to shareholders. Mathematically, the cumulative dividend process is described by an increasing functional which may or may not be continuous with respect to time. The objective in the models presented here is maximization of the dividend pay-outs. We will discuss models with different types of conditions imposed upon a company and different types of reinsurances available, such as proportional, noncheap, proportional in a presence of a constant debt liability, excess-of-loss. We will show that in most cases the optimal dividend distribution scheme is of a barrier type, while the risk control policy depends substantially on the nature of reinsurance available.

Optimal risk and dividend distribution control models for an insurance company

The current paper presents a short survey of stochastic models of risk control and dividend optimization techniques for a financial corporation. While being close to consumption/investment models of Mathematical Finance, dividend optimization models possess special features which do not allow them to be treated as a particular case of consumption/investment models.¶ In a typical model of this sort, in the absence of control, the reserve (surplus) process, which represents the liquid assets of the company, is governed by a Brownian motion with constant drift and diffusion coefficient. This is a limiting case of the classical Cramer-Lundberg model in which the reserve is a compound Poisson process, amended by a linear term, representing a constant influx of the insurance premiums. Risk control action corresponds to reinsuring part of the claims the cedent is required to pay simultaneously diverting part of the premiums to a reinsurance company. This translates into controlling the drift and the diffusion coefficient of the approximating process. The dividend distribution policy consists of choosing the times and the amounts of dividends to be paid out to shareholders. Mathematically, the cumulative dividend process is described by an increasing functional which may or may not be continuous with respect to time.¶ The objective in the models presented here is maximization of the dividend pay-outs. We will discuss models with different types of conditions imposed upon a company and different types of reinsurances available, such as proportional, noncheap, proportional in a presence of a constant debt liability, excess-of-loss. We will show that in most cases the optimal dividend distribution scheme is of a barrier type, while the risk control policy depends significantly on the nature of the reinsurance available.

Instability in the Dividend Policy of the Istanbul Stock Exchange (ISE) Corporations: Evidence from an Emerging Market

Dividend policy behaviour of corporations operating in emerging markets is significantly different from the widely accepted dividend policy behaviour of corporations operating in developed markets. This study provides evidence from the Istanbul Stock Exchange (ISE), an emerging European stock market, and analyses empirically whether the ISE corporations follow stable cash dividend policies in a regulatory environment that imposed mandatory dividend policies. Unlike the empirical results supporting the stable dividend policy behaviour of corporations operating in developed markets, the empirical results show that the ISE corporations follow unstable cash dividend policies and the main factor that determines the amount of cash dividends is the earnings of the corporation in that year.

Optimal risk and dividend control for a company with a debt liability

We consider a model of a corporation, which can choose a production/business policy among an available set of control policies with different expected profits and associated risks. In addition, there is a choice of the amount of dividends to be paid out to the shareholders. Notwithstanding any policy decision there is a constant payment of a corporate debt, such as bond liability or loan amortization. The objective is to find the policy which maximizes the expected total discounted dividend pay-outs until the time of bankruptcy. We model the dynamics of the corporate assets as a diffusion process with the diffusion and drift coefficients being affine functions of the risk control variable. In other words, the potential profit in our model is proportional to risk. The cumulative dividends are modeled by an increasing process. The resulting problem becomes a mixed regular-singular control problem for diffusion processes. We show that there exists an optimal level b 1 such that the optimal dividend policy is to keep the company's wealth below b 1 and pay out as dividends all the amounts in excess of this level. On the other hand, the profit/risk control policy depends on the ratio of the maximal possible expected profit to the liability payments. When this ratio is small, the optimal policy is always to undertake the maximal risk. When this ratio is large, the risk depends on the current amount of the company's wealth. The risk as a function of the wealth is monotone and increasing, reaching its maximum at some b 0 < b 1.

Executive Compensation in EREITs: EREIT Size is but One Determinant

Prior research of senior executive compensation in real estate investment trusts (REITs) has found REIT size as the sole statistically significant determinant of compensation. This research finds that size is only one of several determinants of equity REITs (EREIT) senior executive compensation. In addition to size as measured by EREIT market value, the designation of the EREIT as a retail EREIT, the percentage of stock owned by the senior executive, the dollar amount of dividends paid to the senior executive and the number of years since an EREIT’s initial public offering were found to be significant factors impacting senior executive compensation. The results also contrast with the general executive compensation literature that shows proxies for size as the primary determinants of executive compensation. This research indicates the need for industry specific compensation models to account for variation in executive compensation.