Corporate Dividend Policy Research Articles

Taxes, Corporate Dividend Policy and Personal Savings: The British Postwar Experience

Taxes, Corporate Dividend Policy and Personal Savings: The British Postwar Experience

Increasing Stream Hypothesis of Corporate Dividend Policy

By reviewing the status of dividend policy research, by indicating the gap between theory and practice, and by introducing and explaining the increasing stream hypothesis, an alternative hypothesis of corporate dividend policy is postulated.

Marginal Stockholder Tax Rates and the Clientele Effect

T HE determination of marginal stockholder tax brackets is an important and unresolved issue in the economic literature. Marginal stockholder tax brackets play an important role in stock valuation models [ 1, 6, 14], in normative investment and dividend policy models [11, 16], and in descriptive capital allocation models [ 7, 8, 10, 12 ]. The purpose of this paper is to present and test a method of determining marginal stockholder tax brackets and to explore the implications of our findings for corporate investment policy, corporate dividend policy, and the assumption of market rationality. In the first section of this paper we expand upon the reasons for studying marginal stockholder tax brackets. In the next section we show how marginal stockholder tax brackets can be inferred from the ex-dividend behavior of common stock. In the third and fourth sections we compute marginal stockholder tax brackets and discuss their implications for capital theory.

Corporate Dividend Policy and Preemptive Security Issues

FO R some time the question of how a firm's dividend policy can be expected to influence the value of its shares has been of interest to businessmen, investors, and economists. And yet, until quite recently there existed no well-developed theory (or theories) of the relationship between dividend policy and share valuation. In the past several years, however, the work of Miller and Modigliani, Gordon, Lintner, and others has largely eliminated this deficiency.' This paper is concerned with the question of how dividend policy and share valuation are related for the case of firms that concurrently pay dividends and raise capital through the sale of preemptive security issues. The importance of this question is highlighted by the fact that a significant number of major corporations continue paying dividends while floating preemptive issues. Table 1, for example, shows a sampling of corporations that have recently issued securities to shareholders at the same time that dividends were being paid. In this paper we will argue that, given the current regulations governing the taxation of personal income, there are strong reasons to believe that a reduction in dividend payments by firms that are raising capital by preemptive security issues could lead to an increase in common share values. This general point is, we believe, implicit in several previous papers dealing with dividend policy. Nevertheless, because the argument has not hitherto been stated formally, the magnitude and implications for the theory of share valuation have been largely neglected. Our conclusions relative to the dividend policy of firms that are not anticipating acquiring funds from their stockholders are less easy to prove; nevertheless, there is some carry-over from the particular case that is studied in detail. In particular, it will become apparent that dividend policy can affect the valuation of stock in the presence of personal income taxes that distinguish between ordinary income and long-term capital gains. The present tax law allows deferral of tax payment (or complete avoidance) on capital gains, and recognized gains may be taxed at different rates from ordinary income.2

Corporate Dividend Policy.

Corporate Dividend Policy.

BOOK REVIEWS

The Journal of FinanceVolume 22, Issue 4 p. 703-730 Book Reviews BOOK REVIEWS First published: December 1967 https://doi.org/10.1111/j.1540-6261.1967.tb00313.xRead the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Abstract Book reviewed in this article: Aggregate Theory and Policy: Technology, Economic Growth, and Public Policy. By Richard R. Nelson, M. J. Peck, and E. D. Kalachek. Aggregate Theory and Policy: Economic Behavior of the Affluent. By Robin Barlow, Harvey E. Brazer and James N. Morgan. Business Finance and Investments: The Theory of Business Finance: A Book of Readings. Edited by Stephen H. Archer and Charles A. D' Ambrosio. Business Finance and Investments: C.F.A. Readings in Financial Analysis (First Edition). By The Institute of Chartered Financial Analysis. Business Finance and Investments: Corporate Dividend Policy. By John A. Brittain. Business Finance and Investments: Credit Management. By Robert Bartels. Financial Institutions and Markets: Regulation of Interest Rates on Bank Deposits. By Albert H. Cox, Jr. Financial Institutions and Markets: Politics and the Regulatory Agencies. By William L. Cary. Financial Institutions and Markets: Monetary Theory and Policy. By Richard A. Ward. Financial Institutions and Markets: The Currencies and Financial System of Mainland China. By Tadao Miyashita. International Finance: Economic Policies Toward Less Developed Countries. By Harry G. Johnson. International Finance: International Aid: An Introduction to the Problem of the Flow of Public Resources from Rich to Poor Countries. By I.M.D. Little and J. M. Clifford. International Finance: Public International Lending for Development. By Raymond F. Mikesell. International Finance: International Financial Aid. By Wolfgang G. Feiedmann, George Kalmanoff and Robert Meagher. Public Finance: Public Economics. By Leif Johansen. Public Finance: Studies in the Economics of Income Maintenance. Edited by Otto Eckstein. Volume22, Issue4December 1967Pages 703-730 RelatedInformation

Book Review:Corporate Dividend Policy. John A. Brittain

Book Review:Corporate Dividend Policy. John A. Brittain

On the Dividend Policy of Electric Utilities

D URING the past twenty years a great deal of econometric research has been directed toward the study of the saving behavior of economic units. Thus, personal saving has been explored quite intensively through (personal) consumption studies, especially so in the post-war period. The question of corporate saving, however, has in large measure been neglected, although a casual look at the data would disclose that it has ranged in magnitude from about 300 per cent of personal saving in 1947 to just under 50 per cent in recent years. Undeniably, this is a very significant component of total savings. By corporate saving we mean, of course, undistributed profits; hence, this question could be studied equivalently by studying the dividend policies of firms. On the latter topic some studies have been made and some tentative hypotheses have been formulated. The most widely held view in the recent literature is that propounded by Lintner in his pioneering contribution, [2] and [3]. Lintner's hypothesis states that corporations are conservative in their financial policy, and, consequently, their dividend disbursement activity is characterized by a considerable degree of inertia, and more precisely, that there exists some optimal or target dividend payment (per share) to which corporations adhere. Departures from this level are made only reluctantly, following a change in the level of profits which is deemed to be more or less permanent. Lintner's statistical analysis is based on time series data pertaining to aggregate corporate dividend disbursements and profits. His model has dividends at time t, explained by dividends at time t 1, and profits at time t. This is not a very satisfactory approach, except for shortrun prediction (of aggregate dividends), since it fails to account for apparently wide (intertemporal) variations in the dividend policy of various corporations, and does not go sufficiently far in elucidating the motives and factors involved in deciding the amount of corporate profits to be retained.

Determinants of Corporate Dividend Policies.

The impact of a firm's dividend policy on the welfare of its shareholders has been the subject of considerable controversy in recent years. It has been argued that the dividend pay-out ratio has a ...

Corporations: Significance of Appreciation and Changing Price Levels in Corporate Dividend Policies

Corporations: Significance of Appreciation and Changing Price Levels in Corporate Dividend Policies