Cash Dividend Payments Research Articles

Pre-IPO dividend puzzle: Reaction to IPO underpricing or post-IPO lockup? Evidence from China

It remains a puzzle as to why firms pay cash dividends to initial investors prior to their initial public offerings (IPOs) while at the same time raising capital through the IPOs. Leveraging mandatory disclosure from three years of pre-IPO data in China, we examine two possible explanations for this puzzle: strategic reactions to IPO underpricing and post-IPO lockup. Our findings suggest that (1) when an IPO firm expects a large IPO underpricing, it pays more cash dividends pre-IPO, suggesting that initial shareholders view large IPO underpricing as undervaluing the market value of the firm's cash pre-IPO. (2) When an IPO firm pays more cash dividends pre-IPO, its initial shareholders unload fewer shares post-IPO after lockup expiration, suggesting that the initial shareholders receive “compensation” via cash dividends to ease their liquidity concern from post-IPO lockup. Both results support the proposed explanations. Additional analyses show that high cash dividend payouts pre-IPO are associated with fewer fixed assets, less investment in research and development, and poor performance post-IPO. These results indicate that cash dividends pre-IPO are not consistent with shareholder value maximization. Overall, pre-IPO cash dividends reflect a type II agency conflict in which initial shareholders seek private benefits at the expense of future shareholders.

Cash dividend: Debt policy and liquidity in Indonesian consumer cyclicals company

This study aims to investigate whether debt policy in Indonesia tends to commit cash dividend and whether liquidity maximizes cash dividend. Using a purposive sampling technique, 16 consumer cyclicals companies were selected as research samples that are wholly registered on the Indonesia Stock Exchange. A total of 142 firm-year observations were provided by their annual reports from 2018-2021 and processed within the multiple linear regression statistical method. The study depicts that debt policy negatively affects cash dividend. Meanwhile, the liquidity ratio cannot maximize or minimize cash dividend payments by companies.

Dividend policy and residual dividend theory: evidence from Indonesia

PurposeUsing the residual dividend theory, this study examines the impact of capital expenditures and working capital on the dividend policies of publicly listed companies in Indonesia.Design/methodology/approachUsing data on public companies (other than those in the financial sector) listed on the Indonesia Stock Exchange from 2011 to 2020, this study collected 870 observations (firm-years). This study employs a regression analysis technique using the STATA application program. The main variables in this study are capital expenditure and working capital, and the control variables are sales growth, firm size, leverage, profitability, liquidity and dummy variables for state-owned enterprises. The dependent variable of dividend policy is proxied by the dividend payout ratio.FindingsThis study’s results support the residual dividend theory’s hypothesis, in which capital expenditure negatively affects a company’s dividend policy. This study also analyzes this effect on companies that pay cash dividends at quantile positions of 25, 30, 50 and 60. The results show that the effect of capital expenditure on cash dividend payments is more pronounced in the case of companies whose cash dividends are in the 50th quantile. This result holds across different specification and endogeneity tests.Originality/valueThis study analyzes the residual dividend theory in Indonesian companies, focusing on localized factors and investment priorities. It challenges traditional Western dividend policies and provides empirical data that enhances the theory’s robustness. The findings have practical implications for investors, policymakers and corporate decision-makers in the Indonesian market.

Is the market biased in M&A, dividend payment, and share repurchase events?

Companies with excess capital can opt to: pay dividends to shareholders, buy back treasury shares for short-term shareholder benefits, or pursue M&A investments for long-term shareholder returns. Using difference in differences approach of event research methods combined with unique manually collected data sets, this paper investigates the market bias for three events: M&A, share repurchase, and dividend payment. The results show that information was leaked to the outside 1 day before it was officially announced at all events. When observing the company's performance 3 years after the event announcement, we also find that the market reaction is biased in M&A and stock dividend payment events, but accurate in the cash dividend payment and share repurchases. In addition, the market has the strongest and longest reaction to the news of the company buying back shares; has the weakest reaction to the stock dividend payment; has the shortest reaction to cash dividend payment; has a negative reaction to the acquisition company's stock, and has a positive reaction to the target company's stock. Our research has provided empirical evidence on the market response to published information, and supports CEOs make the most accurate choices when the company has an excess cash flow.

The Effect of Profitability (ROA) and Free Cash Flow on Dividend Payout Ratio in Manufacturing Companies Listed on the IDX in 2019-2022

This study aims to analyze the effect of profitability (ROA) and free cash flow on the dividend payout ratio in manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2019-2022 period. Data was collected from manufacturing companies using quantitative methods and analyzed using multiple regression with the help of the SPSS program. The findings of this study indicate that profitability and free cash flow have a significant influence on the dividend payout ratio. This indicates that the financial performance of manufacturing companies has an impact on dividend payout policy. In addition, this study also reveals that manufacturing companies that are able to manage their assets effectively and efficiently tend to have good financial performance, which allows them to pay cash dividends. The results of this study provide new insights into understanding the relationship between financial factors and the dividend policy of manufacturing companies. The implications of these findings can be an important consideration in making investment decisions in the stock market, as well as contributing to understanding the financial dynamics of manufacturing companies on the IDX.

Revisiting the Effect of Dividend Policy on Firm Performance and Value: Empirical Evidence from the Korean Market

This study investigates the relationship between dividend policy, firm performance, and value within the Korean market, taking into account the unique context of Chaebol ownership structures. Utilizing a robust dataset of 5478 observations from the Korean Composite Stock Price Index, our empirical analysis employs advanced regression models, revealing distinctive effects of various dividend policy measures through the lenses of interest alignment and managerial entrenchment hypotheses. Surprisingly, while cash dividend payments exhibit a robust positive impact on Tobin’s Q and market-to-book ratios, suggesting an overall positive link with market valuations, a closer inspection reveals divergent impacts for Chaebol and non-Chaebol firms. In Chaebol entities, dividend policy proxies consistently demonstrate positive effects on performance metrics, aligning with the interest alignment hypothesis and highlighting strategic signaling efforts. Conversely, non-Chaebol firms exhibit intriguingly negative impacts, supporting the managerial entrenchment hypothesis and implying potential challenges to market value. Firms should prioritize transparent communication on dividend policies for improved investor decision making and enhanced corporate governance in the dynamic Korean market.

Influence of ESG Performance on Fund's Propensity to Hold Shares -Empirical Evidence from China's A-share Listed Enterprises

With the prevalence of the ESG investment concept in China, the scale of ESG investment continues to grow. Taking A-share listed firms as the study sample, this research study empirically investigates the influence and mechanism of corporate ESG performance on the tendency of fund shareholding. The study findings indicate that corporations with better ESG performances are more inclined to attract funds to hold shares. Further, the impact mechanism analysis shows that ESG affects fund ownership mainly through two paths: reducing the risk of stock price collapse and improving the financial performance of enterprises. Further research finds that ESG performance exerts a stronger impact on increasing fund ownership in non-SOE firms than in state-owned firms. Also, firms with sound ESG performance are more inclined to pay cash dividends to return to shareholders. The extended study finds that the effect of ESG on fund shareholding behavior is mainly due to the enhancing effect of three dimensions: management practices, environmental dimension, and social dimension. The conclusion remains unchanged after passing tests such as endogeneity. This research extends a theoretical reference for comprehending the role of ESG in the capital market.

Determinants of Cash Distribution Options in South African Listed Firms: An Empirical Analysis of Earnings, Company Size, and Economic Value Added

The purpose of this study was to examine the determinants of cash distribution options by critically considering the effects of earnings, dividends, firm size, and economic value added. The distribution of cash dividends to shareholders serves as a basic means by which shareholders receive returns on their investments, so it is essential to examine share repurchases alongside dividends to enhance management’s efforts in maximising shareholder value. This study utilised panel data from 52 companies listed on the Johannesburg Security Exchange (JSE) that engaged in open market share repurchases for at least 2 years between 2000 and 2019. The data were extracted from the IRESS database. The panel data regression model was fitted with the ordinary least squares (OLS), difference generalised moment method (Diff-GMM), system generalised moment method (Sys-GMM), and least-squares dummy variable correction estimator (LSDVC). The findings revealed that there was a positive and significant relationship between the earnings per share and the payoff flexibility, implying that there was an inherent flexibility of repurchases as a payout option in the sampled firms. Additionally, the study revealed a significant negative relationship between the firm size, economic value added, and payoff flexibility. This suggests that larger companies tend to distribute a lower proportion of their earnings as share repurchases and opt for higher cash dividends instead. The implications of these findings provide financial managers with valuable insights into the role of share repurchases as a cash distribution choice. By recognising share repurchases as a viable option, financial managers can enhance their efforts to create and maximise shareholder value, particularly in emerging market settings. This evidence should encourage financial managers to recognise share repurchases more as a distribution choice, diffusing the tension regarding share repurchases replacing the payment of cash dividends and some doubt that they may not possess attributes complimentary to cash dividends. The study recommended relevant academic, industry, and policy implications in the South African context.

The pre-IPO dividend and IPO underpricing: Evidence from China

More than one in five listed firms in China pay cash dividends during the year right before their initial public offerings (IPOs). This paper examines the association between pre-IPO dividend payment and IPO pricing using manually collected Chinese data from 2006 to 2019. We find that firms initiating pre-IPO dividends tend to have lower IPO underpricing than non-initiating firms. We also find that the effect of pre-IPO dividend initiation on IPO underpricing is more pronounced for firms with greater pre-IPO growth and profitability. Additional analyses indicate that initiating firms have better pre- and post-IPO operating performance and post-IPO stock performance. Moreover, initiating firms pay more dividends and attract significantly higher post-IPO investor attention. Collectively, the pre-IPO dividend initiation is not a short-term strategic behaviour of low-quality firms, but aims to send positive signals and improve investors' stock valuation.

How does privatization affect cash dividends? Quasi-experimental evidence from China

Against the backdrop of privatization experienced by Chinese state-owned enterprises (SOEs) in recent years, this study investigates how privatized firms change cash dividend payments. Using a difference-in-differences (DiD) research design, we find an increase in cash dividends following privatization. Additional analyses reveal two channels underlying the increase in dividend payouts – that is, reduced insider tunnelling and agency problems associated with cash holding, and improved information environment after privatization. Our findings enrich the literature on privatization by providing new insights into the underlying mechanisms explaining the increased cash dividends from the agency theory and information environment perspectives.

A Theoretical Review of Capital Structure of Quoted Companies in Nigeria

Capital structure is a significant managerial decision because it influences the shareholders’ returns and risk as the market value of the share and may be affected by the capital structure decisions. The theory maintained that financing adapts to mitigate problems created by differences in information between insiders (managers) and outside investors. The company turns first to the financing sources where differences in information matter least. A company’s capital structure shows all the sources of finance a company is utilizing to finance its operations. The study was undertaken to review capital structure of quoted companies in Nigeria. So many theories of capital structure have been developed over the years. These theories have directly and indirectly affected the ways companies in Nigeria raise their capital. From the review obtained, it was revealed that capital structure of quoted companies in Nigeria is a significant measure of their performance. In view of the findings, it was concluded that capital structure of quoted companies in Nigeria is a significant measure of their performance and should be effectively and efficiently managed at all time. The study recommended that quoted companies in Nigeria should invest their profits when there are good investment opportunities and pay cash dividend as soon as enough income is generated.

Applying artificial neural network and binary logistic models to predict propensity to pay cash dividend: Evidence from an emerging market

This study examines the predictors of the propensity to pay cash dividend including industry structure, natural log of revenue, firm size, big 4 auditors, and financial leverage. The paper draws upon the theory of uncertain binary choice. Pooled unbalanced panel logistic regression and artificial neural network were used to analyze data of 725 firm-year observations obtained from companies’ annual accounts and financial statements from 2012 to 2021. The documented results find that industry structure, natural log of revenue (big 4 auditors, firms’ size and financial leverage) significantly influence the propensity to pay (not to pay) cash dividend. The result on the interaction term shows that industry structure and log revenue has the propensity to significantly predict non-payment of cash dividend. Nagelkerke pseudo R2 indicates that the predictors explain about 36% of variability in payment of cash dividend. The ROC-curves indicate good model fits as areas under the curve are up to .85. We recommend that the management of listed companies and equity stockholders who are interested in dividend payment should consider the history of industry structure and companies’ revenue while those not interested in dividend payment should consider company size, the presence of big 4 auditors and financial leverage.
 Keywords: Cash dividends, Industry structure, Independent

Study on the Impact of Government Subsidies on the Level of Corporate Cash Dividend Payments based on a Different Perspective

At this stage, China has entered a "new normal" period of economic development in which the government plays a key role in macro-control policies and resource allocation. The level of cash dividend payment is both a guarantee for enterprises to return the rights and interests earned from consumers' investment and to signal to the market that the enterprise is operating well, and a requirement to alleviate the enterprise agency problem and help the capital market operations in an orderly manner. By paying cash dividends, enterprises improve people's livelihood and achieve social equity by sounding the income distribution mechanism. In this paper, a-share listed enterprises from 2016 to 2020 were taken as the research object, the level of cash dividend payment as the explanatory variable, the government subsidy as the explanatory variable, and 9 control variables and 2 virtual variables were selected for probit regression analysis. The results show that government subsidies have a significant effect on the level of cash dividend payment, and there are significant differences in the degree of effect among different types of enterprises, and hypotheses 1 and 2 proposed in this paper are verified.

The impact of government grants on the level of corporate cash dividend payments Research

As a way to compensate for market failures, intervene in the market economy and support specific industries, government subsidies are important for improving the efficiency of fiscal expenditure, adjusting and optimising the economic structure and rationalising the distribution of national income. The level of cash dividend payment often reflects the operating conditions of enterprises, and the impact of government subsidies on the level of cash dividend payment of enterprises can reflect whether the allocation of government subsidies is reasonable. This project uses data from 4,610 non-financial listed enterprises in China A-shares from 2016 to 2020 to conduct an empirical study on the relationship between government subsidies and cash dividend payout levels, and to explore the impact of government subsidies separately by industry. The study found that: government subsidies have a general effect on the increase of cash dividend payment level of enterprises; the fundamental factor that government subsidies have different effects on the cash dividend payment level of different industries is the requirement of cash flow of enterprises; the new manufacturing industry, wholesale and retail industry, real estate industry and agriculture, forestry and fishery industry are significantly affected by government subsidies.

Deconstructing the Dow Jones Industrial Average

The Dow Jones Industrial Average (DJIA) has historically been the most recognized stock index in the United States. It has several unique features. It uses price weights, it ignores cash dividend payments, and it also treats stock dividends, rights issues, and other corporate actions inconsistently. We show that price indices that use alternative weighting methods and more systematic inclusion criteria perform similarly to the DJIA. However, ignoring cash and stock dividends underestimates the long-run returns earned by stock market investors dramatically. If the DJIA had consistently adjusted for dividends and other corporate actions since 1928, the index would have closed at 1,113,047 instead of 28,538 points at the end of 2019.

Share pledging, social trust and cash dividend payout: evidence from China

ABSTRACT Paying less cash dividend is one type of pledging shareholders’ opportunistic behaviour. Previous literature leaves unclear evidence about the impacts of share pledging on such firm-level decisions. Using the data of listed firms between 2014 and 2020 in China, we fill this void by examining the relationship between share pledging and cash dividend payouts from the perspective of social trust. Using a Heckman two-stage model, we find that share-pledging firms are less likely to pay cash dividend and the cash dividend payout is negatively related to pledged shares. We employ a hierarchical linear model and find that the level of social trust positively moderates the relationship between share pledging and cash dividend payout. Further, we find the effect is more pronounced for firms with higher free cash flows. The results indicate that social trust reduces the moral risk of pledging shareholders of listed firms in emerging market.

Peran gender diversity dewan perusahaan dalam menentukan kebijakan dividen di Indonesia

Dividend policy becomes very important especially with the presence of gender diversity on the company's board. This study aims to empirically examine the role of women's gender on the board of commissioners and the board of directors in determining dividend policy. The research sample uses companies that pay cash dividends listed on the Indonesia Stock Exchange in the 2015-2019 period. Data analysis using SEM-PLS method with WarpPLS 8.0 application. The results showed that the gender diversity of the board of commissioners had a negative effect on dividend policy. The results of the analysis show that the negative effect of the gender diversity of the board of commissioners on dividend policy is non-linear which has a U-curve pattern. Meanwhile, the gender diversity of the board of directors has a positive effect on dividend policy. In general, the research results are in line with the agency theory which uses an increase in dividend payments to reduce the occurrence of agency problems.

Impact of Venture Capital on the Dividend Policy of Listed Companies and Management Platform Design

This paper uses the data of Chinese A-share listed companies from 2003 to 2019 to study the impact of venture capital holdings on the dividend policy of listed companies. The research findings show that venture capital holdings increase the willingness to pay cash dividends and the payment level. This conclusion still stands after using the PSM matching method and other robustness methods, indicating that there is causality between venture capital holdings and the dividend policy of listed companies. Further research finds that the course of action for venture capital holdings to increase the willingness of listed companies to pay cash dividends and their dividend payment level is to increase the dividend payout ratio by alleviating the company’s agency level. Further research finds that different types of venture capital will also have an impact on the dividend policy. Foreign investment venture capital organizations are more favorable for increasing the willingness of listed companies to pay cash dividends and their dividend payment level. In addition, the impact of venture capital holdings on the dividend policy is more obvious in the central and western regions where economic development is relatively backward and is less obvious in the eastern regions. Based on J2EE, a venture capital information management platform is designed and developed. The research of this paper shows that venture capital shareholding plays an important role in promoting dividend payment of listed companies, and has enriched the research results of the value-added role of venture capital. At the same time, from the perspective of dividend policy, it has brought to light the corporate governance effectiveness of venture capital and has provided certain theoretical evidence for the assertion that capital can better serve the real economy.

R&D intensity and firms dividend policy: evidence from BRICS countries

PurposeGiven the importance of both research and development (R&D) investments and dividend policy in the growth of firms, this paper examines the moderating effects of investor protection and other country-level governance mechanisms on the relationship between R&D investments and dividend payments in the firms from Brazil, Russia, India, China and South Africa (BRICS countries).Design/methodology/approachThis empirical study uses a sample of 22,073 firm year observations from the BRICS countries over a period of 2008–2020 and employs both ordinary least squared (OLS) and system generalized method of moments (GMM) estimation methods. The GMM estimation controls for unobservable heterogeneity and endogeneity and reduces estimation bias.FindingsThe findings indicate that although R&D intensity is negatively related with the cash dividend payments, with the interaction of investor protection and other country-level mechanisms the relationship between R&D intensity and dividend payments becomes positive. The results further show that investor protection has stronger impact on the relationship between R&D intensity and firm cash dividend payments than other selected country-level governance factors.Practical implicationsThe research findings should encourage the policy makers in BRICS countries to strengthen investor protection and enhance quality of their institutions to make a right balance between retaining their growth potential and maintaining the value of the firms.Originality/valueThis is the first study to provide evidence of the moderating effects of investor protection and other country-level governance mechanisms on the relationship between R&D investments and dividend payments using the data from BRICS countries.

Dual-class stock structure and firm investment

Dual-class stock structure helps insiders gain control through different voting rights, but also exacerbates the principal-agent conflict. The separation of control rights and cash flow rights enhances managerial opportunistic behavior. We find that dual-class stock structure aggravates the over-investment behavior of listed firms. The impact of free cash flow on over-investment is more severe in dual class firms than in single-class firms. Paying cash dividends reduces the effects of dual-class stock structure, and separation of control and cash flow rights on overinvestment. Regulators need to strengthen the supervision to restrict managerial opportunistic behavior in firms with dual-class share structure.