Cash Dividend Payments Research Articles

TAX AVOIDANCE, RELATED PARTY TRANSACTIONS, CORPORATE GOVERNANCE AND THE CORPORATE CASH DIVIDEND POLICY

This study aims to investigate the relationship between tax avoidance, related party transactions and the corporate dividend policy. Furthermore, this study will also investigate the moderating effects of the implementation of Corporate Governance (CG) on the relationship between tax avoidance, Related Party Transactions (RPT) and corporate dividend policies. Our sample covers companies listed on the Indonesian Stock Exchange during 2011-2014. The results provide moderate support for the proposed hypotheses. First, the greater tax avoidance that a company makes will increase the size of the firm's RPT. Second, the higher that the company's RPT is, this will lower the company's cash dividend payout rate. Third, the greater the tax avoidance is, the lower the company's cash dividend payout rate will be, which is done through a related party transaction.Fourth, the impact of the implementation of strong CG will weaken the positive relationship between corporate tax avoidance and the company’s RPT size, strengthen the negative relationship between the RPT’s size and the cash dividend payout policy of the firm, and strengthen the negative relationship between the company’s tax avoidance and the company's cash dividend payout policy which is mediated by the company’s RPT. This study makes three contributions. First, this study shows an indirect relationship between tax avoidance and cash dividend payments, mediated by RPT. Second, this study tries to examine the effect of CG’s moderation on the relationship between tax avoidance and RPT, as well as the effect of CG’s moderation on the relationship between tax avoidance and cash dividend payments, mediated by RPT. Third, this study developed RPT measurements by looking at the RPT’s components more specifically (looking at components of transactions outside of the main business of the company - the "others" component).

Corporate dividend decisions and dividend smoothing

PurposeThe purpose of this paper is to investigate the impact of regulations, reforms and legal environment on dividend policy in a different institutional setting. Particularly, it examines the firm-level cash dividend behaviour of publicly listed firms in Turkey in the post-2003 period, since there were major economic and structural reforms as well as significant regulatory changes of dividend payout rules imposed by the supervisory bodies.Design/methodology/approachThe paper focuses on a recent large panel data set of 264 Istanbul Stock Exchange (ISE)-listed firms over a ten-year period 2003-2012. First, it employs a modified specification of Lintner’s (1956) partial adjustment model for analysis regarding target payout ratio and dividend smoothing. Second, it performs a logit model for analysis in identifying the link between financial characteristics and the likelihood of paying dividends.FindingsThe results show that ISE firms now follow the same determinants as suggested by Lintner. They, indeed, have long-term payout ratios and adjust their cash dividends by a moderate level of smoothing, and therefore adopt stable dividend policies (although less stable policies compared to their counterparts in the developed US market) as a signalling mechanism over the period 2003-2012. Moreover, the results also report that ownership structure concentration affects the target payout ratio and dividend smoothing in the Turkish market. In addition, the results further show that more profitable, more mature and larger sized ISE firms are more likely to pay cash dividends, whereas ISE firms with higher investment opportunities and more debt are less likely to distribute cash dividends in the post-2003 period.Originality/valueTo the best of authors’ knowledge, this paper is the first major research that examines the implications of reforms and regulations on cash dividend payments and dividend smoothing over time in Turkey during its market integration process in the post-2003 period.

Corporate responses to the repatriation incentives and domestic production activities deduction

The 2004 American Jobs Creation Act (AJCA or the Act) sought to encourage U.S. companies to repatriate foreign earnings and invest them domestically in an effort to increase capital spending and employment. This investigation looks at how the two tax provisions in AJCA, i.e., the repatriation tax holiday and the domestic production activities deduction (DPAD), affected domestic investment and payout behaviors. An examination of repatriating firms based on the tightness of their capital constraints shows that the tax incentives fail to induce non-constrained, repatriating firms that benefit from DPAD to reinvest the capital domestically. Only capital-constrained, repatriating firms benefitting from DPAD increase domestic investment and reduce share repurchases; however, these firms also increase their cash dividend payments. The findings should be useful to policymakers as they consider modifying the corporate tax structure to increase domestic investment by encouraging U.S. firms to repatriate foreign earnings and reinvest them domestically.

Impact of board gender diversity on dividend payments: Evidence from some emerging economies

This study investigates the impact of board gender diversity on dividend payments in the context of emerging economies. Using a dataset of listed firms from India, China and Russia over the period 2007–2014, we find strong and robust evidence indicating that board gender diversity is negatively related to cash dividend payments in all emerging economies. Moreover, we find that state-ownership positively moderates the relationship between gender diversity and dividend payments. However, this effect is observed only for China and Russia. In additional analyses, we find that the negative link between board gender diversity and dividend payments is more pronounced during the financial crisis. However, the moderating role of state-ownership does not remain significant during the financial crisis.

PENGARUH FAKTOR INTERNAL PERUSAHAAN TERHADAP KEBIJAKAN DEVIDEN PERUSAHAAN FARMASI TERDAFTAR DI BURSA EFFEK INDONESIA PERIODE 2008-2014

This study aims to examine and analyze the effect of internal determinant dividend payout ratio pharmaceutical company, annual data observation period 2008 until 2014. Type studies quantitative research. Population of the entire pharmaceutical company amounted of 10 companies, criteria sampled pharmaceutical company that consistently pay cash dividends, found 6 companies listed in Indonesia Stock Exchange with non probability sampling technique is purposive sampling. Analysis data with panel data regression fixed effect which has value R-square larger. The results showed that current ratio, return on assets, debt to equity ratio, earnings growth, return on equity, earnings per share and market to book value simultaneously are having significant influence to the dividend payout ratio. Partially return on assets and market to book value has a positive significant effect on the dividend payout ratio, while of current ratio, debt to equity ratio and return on equity has a significant negative effect. Earnings growth and earnings per share are not having significant influence on the dividend payout ratio. Suggested adding variables external factors, using a sample of companies for more.

Imputation tax system, dividend payout, and investor behavior: Evidence from the Taiwan stock exchange

Abstract This paper examines the change in corporate dividend policy and investor behavior in relation to the introduction of the imputation tax system in Taiwan. However, the findings of this study are unlike those of previous studies. Stock dividends are treated as a dividend for taxation purposes and represented the dominant payment mechanism in Taiwan before 1997. By contrast, both the number of firms paying cash dividends and aggregate cash dividend payments increase after the introduction of the imputation tax system. Consistent with the tax preference for the distribution of dividends, a higher level of tax deductible rate was associated with a higher cash dividend payout ratio. Domestic individual investors have been the only shareholders affected by the introduced dividend imputation, whereas the percentage of firms owned by domestic individual investors has decreased. However, the percentage of firms owned by foreign institutional investors has increased.

Conservative Accounting, IFRS Convergence and Cash Dividend Payments: Evidence from China

ABSTRACTWe investigate the governance role of conservative accounting in mitigating the creditor–stockholder conflict by affecting firms’ dividend policies, and how the convergence to International Financial Reporting Standards (IFRS) affects the governance role of conservative accounting as it relates to dividend policy. We analyze data on Chinese listed firms from 2000 through 2011. The use of conservative accounting reduced cash dividend payouts, thereby playing a governance role by mitigating the firm's creditor–stockholder agency conflict. However, China's convergence to IFRS reduced the governance role of conservative accounting on dividend policy by reducing the accounting conservatism of listed firms in China.

Convergence rates of recombining trees for pricing options on stocks under GBM and regime-switching models with known cash dividends

In the literature there appear various kinds of binomial trees for pricing options on stocks under geometric Brownian motions (GBMs) with known cash dividends. The aim of this paper is to compare the performance of the existing binomial trees in aspect of the convergence rates, which are usually used to measure precisely how fast the approximate values converge to the exact one, and to give a theoretical proof of the convergence rates for the interpolation binomial trees which are based on a model that excludes the arbitrage possibilities. Also the paper extends the studies to the regime-switching models with known cash dividend payment.

The effect of the professional education background of the chairman of the board and executive management on dividend policy in Taiwanese listed companies

This study investigates whether company’s chairman of the board and management’s education background is business or accounting, their decision making will cause the result of company’s dividend policy or not. This study uses logistic and OLS regression method to exam Taiwanese public company from 2007 to 2011. The empirical result shows that when company’s chairman of the board graduates from business school, the company will pay less cash dividend. On the other hand, when more management education background is business or accounting, the company tends not to pay cash dividend. Furthermore, under the situation that chairman of the board is also the CEO of the company, when chairman of the board graduated from business school, the company tends not to pay cash dividend and pay less cash dividend

Unrealized earnings, dividends and reporting aggressiveness: an examination of firms’ behavior in the era of fair value accounting

AbstractThis study explores changes in the dividend policy of companies following the adoption of fair value accounting rules. Using a sample of Israeli firms that adopted International Financial Reporting Standards (IFRS), we document a dramatic increase in the payout ratios of firms that distributed dividends based on revaluation gains from 32 percent of realized earnings in the pre‐IFRS period to 115 percent in the post‐IFRS period. Furthermore, we reveal that firms paying dividends from unrealized earnings are more aggressive both in their book and tax reporting behaviors. We demonstrate that this increased aggressiveness is associated with the payment of cash dividends from paper profits.

Long-Term Price Reaction to Dividend Reduction in an Imputation Environment Evidence from Australia

This article empirically investigates the information content and signalling power of decreases and omissions of cash dividend payments in an imputation tax environment. Consistent with prior literature We find significantly negative long term abnormal returns subsequent to dividend reductions, with some support for less negative long term abnormal returns arising in the case of unfranked dividend reductions Overall, our study shows conclusively that dividend reductions in Australia constitute a strong signal regarding the future prospects of the firm and, as such, our results are at variance with the results obtained in the U.S. The tax system in Australia differs from that in the U.S. and we do find some evidence of differential tax effects across the franking status of dividends.

Institutional stock ownership and firms’ cash dividend policies: Evidence from China

Agency theory suggests that outside shareholders prefer higher dividend payouts in order to reduce the free cash flows of firms that are under the insiders’ control. Our study investigates the effects of mutual funds, typically the most important and influential type of outside shareholder, on firms’ dividend payouts in China during the period from 2003 to 2011. We find that mutual funds influence firms to pay higher cash dividends. The results are consistent with the predictions from exit theory. The effects are more pronounced in firms controlled by state and regional governments and in firms with relatively higher free cash flows. We also find evidence that the mutual funds’ effects are stronger when their investment horizon is longer and the ownership interest is larger. Other institutional investors, such as banks, insurance companies, and securities companies have a lower exit threat and do not have an influence on firms’ cash dividend payments or financial performances.

Whether Cash Dividend Policy of Chinese Listed Companies Caters to Investors’ Preference

From the perspective of catering theory of dividends, this paper studies the relationship between cash dividend policy and investors’ preference, and also the relationship between cash dividend policy and enterprise features, making use of 2008-2014 data of listed companies in Shanghai and Shenzhen Exchanges. Our research discovers that rising corporate profitability and scale increase willingness to pay cash dividends of listed companies, whereas increasing investment opportunities significantly reduce the cash dividend payment. We create the variables of propensity to pay and dividend premium. The 2008-2014 dividend premium in Shanghai Exchange is negative and is negatively correlated with propensity to pay, showing that cash dividend policy still does not cater to investors’ preference after the completion of no-tradable shares reform.

Dividend Payments and Stock Price Crash Risk

Using a large sample of U.S. firms over the period of 1991-2011, this study examines whether and how cash dividend payments affect stock price crash risk. We predict and find that dividend payments are negatively associated with stock price crash risk. In addition, we find that the effect of dividend payments on lowering crash risk is more pronounced for firms with higher information asymmetry (proxied by higher market-to-book ratios or positive R&D expenditures) and for those with larger free cash flows. Moreover, we document that dividend payments reduce bad news hoarding (overinvestment) whereas bad news hoarding (overinvestment) leads to crash risk, suggesting that dividend payments (1) enhance financial reporting quality and investment efficiency and (2) mitigate stock price crash risk through two channels: curbing bad news hoarding and curtailing overinvestment. Our main results are robust to various sensitivity checks including controls for endogeneity concerns. Our findings are important to investors, policy makers, and academics, because they (1) suggest that dividend payments are an easily observable indicator that investors can use to assess firms’ financial reporting quality and crash risk and (2) support some policymakers’ proposition that dividends mitigate earnings manipulation and fraud.

Analisis Reaksi Pasar Atas Pengumuman Cum Dividen (Studi Pada Saham Yang Terdaftar di Jakarta Islamic Index Tahun 2012-2013)

Cash dividends is one of the corporate action that contains information related to the company's performance and signal to investors about the company's prospects. This internal information of the company will affect the investment decisions of investors. The reaction of investors in the market will lead to changes in demand and supply of common stocks around the cum-dividend date. This study aims to determine the reaction of the Islamic capital market as indicated by the change in abnormal return around the cum-dividend date.This study uses event study approach, carried out on 30 issuers listed on the JII during 2012-2013 who pay cash dividends. The period of observation in this study was for 29 days, starting 14 days before the event date to 14 days after the event date. This study uses one-sample test in hypothesis testing.The results based on the statistical test showed significant variables caar AAR and on some days around cum dividedn date. These results indicate that there is a market reaction around cum dividend.

Does Refinancing Incentive Affect Cash Dividends Policy? Evidence from the Semimandatory Dividend Policy in China

ABSTRACTWe analyze the effect of a new regulation on the cash dividend policy of listed companies in China. Using data from China’s listed companies between 1999 and 2009, our empirical analysis shows that the relationship between the refinancing incentive and the cash dividend is not significant before 2001, and since the China Securities Regulatory Commission (CSRC) introduced a semimandatory dividend policy that directly related refinancing qualifications to companies’ cash dividend payments in 2001, companies with higher refinancing needs are more likely to pay or pay much more cash dividends. We also find that numerous listed companies pay dividends strategically to meet the requirement of regulation, which limited the effectiveness of the semimandatory dividend policy.

Do Annual Stock Price Effects of Extreme Cash Dividend Pay-Out Events Differ from Their Short Term Effects?

In this paper, we assess the long-term stock price impact of 1327 cash dividend payment initiations and 1156 cash dividend payment omissions of firms listed on the NYSE and the NASDAQ, from 1972 to 2012. In particular we compare the annual returns of dividend initiating and omitting firms and firms that are equally likely to initiate (or omit). We find larger price effects during the years of cash dividend initiation and omission than is measured by earlier short period event studies, but we find no price impact after the year has elapsed. When measuring such long-run effects, contemporaneous (same year) determinants of price effects may confound the findings of pure dividend initiations or omissions. We therefore test whether there are also unexpected changes in the contemporaneous determinants of returns, and we find that risk measures and net income differ systematically between firms that initiate (or omit) and firms that have similar characteristics, but do not change their payout policy. When correcting for such effects we find that systematic risk does not influence concurrent returns in the years of initiations or omissions, though total risk does. Idiosyncratic risk changes only influence the returns after dividend omissions. With and without correction for ‘contemporaneous’ factors, we find –also for several robustness tests- that the one year price impact of initiations is larger than that of omissions, which suggests that the surprise effects of dividend omissions are on average smaller than those of dividend initiations.

KEPUTUSAN KEUANGAN, UKURAN PERUSAHAAN, STRUKTUR KEPEMILIKAN DAN NILAI PERUSAHAAN PUBLIK DI INDONESIA

The objectives was to find empirical evidence of the influence fi­nan­cial d­e­cisions, firm size, and owner­ship structure on firm value in the three economic con­di­tions (before, during, and after the crisis). The model was used mul­tiple reg­ression. The study was con­duc­ted in 1992–2008 with samples of 78 public com­pa­nies and 1084 datas. The results explained that company size and de­cision not to pay dividends were most af­fected varia­bles. In addition, policy not to pay dividends had negative ef­fect on firm value. There were also significant differences of company value. For public companies, company's size should be considered. Po­li­cies of paying cash dividends could be con­sidered in order to increase company value .

Dividend policy in India: new survey evidence

Purpose – The purpose of this paper is to survey managers of dividend-paying firms listed on the National Stock Exchange (NSE) in India to learn their views about the factors influencing dividend policy, dividend issues, and explanations for paying cash dividends and repurchasing shares. The authors compare the results to other dividend surveys based on firms in Indonesia, Canada, and the USA. Design/methodology/approach – The authors use questionnaire to gather primary data from a sample of 500 firms listed on the NSE. Findings – The most important determinants of dividends involve earnings (the stability of earnings as well as the level of current and expected future earnings) and the pattern of past dividends. Comparing the overall rankings of the 21 factors by respondents from Indian firms to those of Indonesian, Canadian, and US firms reveals statistically significant correlations. Respondents also perceive that dividend policy affects firm value. Respondents also view maintaining an uninterrupted record of dividends as important. The most highly supported explanations for paying cash dividends concern signaling, the firm life cycle, and catering. Although none of the theories of repurchasing shares is dominant, respondents provide little support for the agency explanation. Research limitations/implications – Although the tests suggest that the sample does not suffer from non-response bias, the findings should be viewed as suggestive rather than definitive because of the relatively low response rate. Originality/value – The paper presents new evidence about dividend policy of Indian firms. To the knowledge, this is the most comprehensive survey of Indian firms to date that captures managerial perceptions on both cash dividends and share repurchases.

Corporate dividend policy revisited

Purpose – The purpose of this paper is to provide an overview and synthesis of some important literature on dividend policy, chronicle changing perspectives and trends, provide stylized facts, offer practical implications, and suggest avenues for future research. Design/methodology/approach – The authors provide a survey of literature surveys with a focus on insights for paying cash dividends. Findings – The analysis of literature surveys on dividend policy provides some stylized facts. For example, US evidence indicates that the importance of cash dividends as a part of investors’ total returns has declined over time. Share repurchases now play an increasingly important role in payout policy in countries permitting stock buybacks. The popular view is that dividend policy is important, as evidenced by the large amount of money involved and the attention that firms, security analysts, and investors give to dividends. Firms tend to follow a managed dividend policy rather than a residual dividend policy, which involves paying dividends from earnings left over after meeting investment needs while maintaining its target capital structure. Certain determinants of cash dividends are consistently important over time in shaping actual dividend policies including the stability of past dividends and current and anticipated earnings. No universal set of factors is appropriate for all firms because dividend policy is sensitive to numerous factors including firm characteristics, market characteristics, and substitute forms of dividends. Universal or one-size-fits-all theories or explanations for why companies pay dividends are too simplistic. Practical implications – The dividend puzzle remains an important topic in modern finance. Originality/value – This is the first a survey of literature surveys on cash dividends.