Dividend Patterns Research Articles

Dividend Announcements and Share Price Dynamics: Unraveling the Connection

This research paper delves into the dynamic landscape of dividend decisions in 2023, exploring the intricate interplay between market price of select equity shares and dividend announcements. In the ever-evolving global economy, firms face multifaceted challenges and opportunities that shape their dividend policies. Employing a comprehensive analysis of recent data, this study investigates the influence of dividend decisions and their implications on shareholder value. Through meticulous examination of dividend patterns across various industries, this research uncovers novel insights into the shifting paradigms of dividend distribution. The paper strives to establish a connection between market price in taking dividend decisions, shedding light on the delicate balance companies must strike between rewarding shareholders and ensuring sustainable financial growth. Incorporating recent data, this paper contributes to the academic discourse on corporate finance and also offers practical implications for businesses navigating the complex terrain of dividend decisions.

Do Dividend Announcement Impact Share Price?

This research delves into the intricate landscape of dividend decisions in 2023, exploring how declaration of dividends impact share price. In today's dynamic global economy, companies encounter multifaceted challenges and opportunities that influence their dividend policies. Using recent data analysis, this study investigates the dividend decisions and their effects on both firm performance and shareholder value. By meticulously examining dividend patterns across various industries, this research uncovers fresh insights into the evolving strategies of dividend distribution. Additionally, the paper analyzes how investor sentiment and market volatility influence dividend policies, emphasizes the delicate balance companies must strike between rewarding shareholders and ensuring sustainable financial growth. Using quantitative data, this research offers a nuanced understanding of the contemporary factors guiding dividend choices, presenting valuable insights for corporate leaders, investors, and policymakers. Through the incorporation of recent data and subsequent analyses this paper contributes not only to the academic discourse on corporate finance but also provides practical implications for businesses navigating the intricate terrain of dividend decisions in 2023.

Dividend Payout Policy and Global Financial Crisis: A Study on Asian Non-Financial Listed Companies

This study assesses the dividend payout options of non-financial firms listed on the stock exchanges in four Asian countries: Malaysia, Thailand, Singapore and Hong Kong, from 2006–2016. Multinomial logistic regression was used to justify the determinants of four mutually exclusive payout choices (increase, cut, omit or maintain) in the context of catering, signaling and smoothing concerns. The study is split into pre-, during and post-crisis periods. Several dividend patterns were observed across the nations and sub-periods, and the empirical results reveal that firms shifted their dividend policy during the financial crisis. More specifically, firms adopted a conservative strategy and were more concerned about preserving funds rather than distributing dividends during the financial crisis. The consequence is broadly consistent with the view that the dividend payer’s characteristics are the most relevant to explaining the dividend payout options, while cutting dividends was one of the methods used to maintain financial flexibility during the financial crisis period.

Impact of economic policy uncertainty on dividend decision: A moderating role of board financial expertise

Increased competition in the world of emerging financial markets has highlighted the need for more strategic and far‐sighted decisions. Living in a constrained economy investor has always been sensitive about the dividend patterns offered by the firm. Current study focuses on the moderating role of board financial expertise (BFE) on dividend decision of the firm during economic policy uncertainty (EPU), by taking data for 517 nonfinancial listed firms from year 2007–2015. Study presents its empirical model in two forms based on dividend initiation (Di) by nondividend payer firms and dividend termination (Dt) by already dividend paying firms during EPU. Logit model was employed to access the effect of explanatory variables on the probability of terminating the dividend by dividend payers and probability of initiating the dividend by nondividend payers during EPU. The results indicate that firms terminate dividend at the time of uncertainty, but when BFE was introduced as a moderator, previously nonpayer firms initiate dividend and previously payer firms sustain dividends payments at the time of EPU that remains robust with the inclusion of additional CEO level and corporate governance variables. Study further confirms during the EPU, dividend decisions in turn significantly affect firm value as supported by expectancy theory. Results suggest that BFE can be an important signal for keen market participants in deciding future dimensions of a firm.

When no news is good news: failing to increase dividends

PurposeThe study's purpose is to examine market returns around dividend announcements that contrast with a pattern of prior dividend announcements.Design/methodology/approachThe paper identifies firms that have a smooth dividend pattern of once-a-year dividend increases but at some point break that pattern and announce an unchanged dividend. The sample design allows the opportunity to investigate the market reaction to unchanged dividend announcements when an increase was likely to have been expected.FindingsThe results indicate that failing to increase the dividend is associated with significantly positive abnormal returns that are greater in magnitude for more entrenched dividend-increase records, supporting a contrast-effect hypothesis.Originality/valueThe results indicate that dividends are interpreted not only relative to the immediate dividend amount but also how the decision contrasts with dividends over a prolonged period. This finding suggests that the information content of the announcement of an unchanged dividend can vary according to the prior dividend pattern.

Cluster analysis of share price: How firm characteristics relate to accounting metrics

The purpose of this paper is to improve our understanding of the relationship between share price and accounting information. Much of the literature utilizes the earnings number to reflect firm value. However, the revenue number seems more relevant for high tech firms (Xu, Cai, & Leung, 2007), and cash flow figures are more informative for internet companies (Romanova, Helms, & Takeda, 2012). We build on this notion that share price may map out to different accounting numbers for different firms. We collect 629 accounting metrics for 3,365 firms in the U.S. and estimate their correlation with the firms’ share price. We analyze these correlations and find that many firms exhibit a low correlation between share price and earnings. Other accounting numbers are important for these firms, including book value of net assets, retained earnings, stock options, gain or loss items, special or non recurring items, and dividend rates. We are curious to learn what causes firms to anchor onto different metrics, therefore perform a cluster analysis to group similar firms together along three key accounting metrics. We examine the composition of each cluster and find that capital structure, dividend patterns, the persistence of operations, age, and industry can influence which accounting number is correlated with firm value. We encourage other researchers to continue this exploration as there are many interesting questions to answer.

What Do We Know about Dividend Smoothing in This Millennium? Evidence from Asian Markets

ABSTRACT We examined the smoothing pattern of dividends on publicly stock-listed companies in the so-called Asian Tigers – China, Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand. Based on a panel of data comprising 702 companies from 2000 to 2015, we estimated the speed of dividend adjustment (SOA) using a generalized method of moments two-step estimator. Having implemented an improved procedure using a rolling regression, we obtained the SOA coefficient equal to 0.447, which confirmed a moderate level of dividend smoothing among the selected countries. Moreover, we examined the SOA’s drivers by employing a range of variables reflecting the companies’ and the countries’ characteristics. The most influential firm-level determinants of dividend smoothing in emerging Asian markets were payout ratio, retained earnings and level of risk proxied by the return on asset standard deviation. Additionally, we identified the relevance of the financial market sophistication and board efficacy as potential drivers of dividend smoothing.

Analysis of Factors Influencing Dividend Policy with Special Reference to Listed Companies in Sri Lanka

The research examines the factors influencing on dividend policy of listed companies in Sri Lanka. The investigation was performed with semi-structured questionnaire prepared by using Google Form and sent through email to the Chief Financial officers of the selected120 listed companies. The findings revealed that the current earnings, past dividend patterns and liquidity constraints more influence on dividend policy in listed companies in Sri Lanka. Further profitable investment opportunities, growth opportunities, shareholders’ preference, target dividend payout ratio, largest shareholder, statutory requirements and method of paying dividend are also influence on dividend policy in listed companies in Sri Lanka.

Dividend Policy Trend: A Comprehensive Study on the Listed Industrial Sector of Bangladesh

The financial decision is rotated around the dividend decision. The objective is to identify the dividend pattern and the management’ views of dividend policy for revealing the present scenario of dividend practices in the capital market of Bangladesh. The parametric test, non-parametric test and percentile are used for inferring the result. In the manufacturing sector, the miscellaneous sector provides the highest payout. The DPS, EPS, MPS of the large size firm is better than small and medium size firms. The payout of the older firms is more than the newly listed firms. The highest payouts are in medium leveraged firm, low risk’s firm, medium PE ratio’s firm. The survey results reveal that the both shareholders and companies prefer the cash dividend most because of majority shareholders’ expectation. The most of the companies pay cash dividend with stable payout. The majority companies follow increasing trend in dividend payment but there is no satisfactory research to justify the investors’ preference. The capital market related stakeholders should follow these findings.

Trend of dividends disappearing and reappearing in Pakistani listed firms

The objective of this study was to explore the main factors of dividend policy determinants. For this purpose, a sample of 150 listed firms in PSX taken into account for the period of 2008-2018. A secondary data taken from SBP publication, Stock exchange collected for this study and variables used size, debt ratio, profitability, size, investment, Firm’s Maturity, Market Capitalization, Return on Equity (ROE), Growth in Sales and leverage was utilized using Panel regression techniques. Data of dividend shows most of the period dividend amount and dividend firms increased during the period of research 2008-18. The trend also shows that dividend pattern increase as base year data to end period study during both democratic governments. Study findings also show that three different aspects of the dividend payment propensity during 2008-2018. Results show that payment of dividend is declined mostly in the small and newly firms because they have less income generated from profit, younger firms, and firms as compared with highly investment pattern of firm, high debts, higher risk in their business and high tax rates on dividend. The Study also finds a significant and positive association with propensity to pay dividend of catering theory and support the catering theory.

Dividend policy of firms listed on Casablanca Stock Exchange: a panel data analysis

This study attempts to identify the main determinants of dividend policy and evaluate the theories that better explain the dividend behaviour of Moroccan listed firms. Data consists of all non-financial firms listed on Casablanca Stock Exchange (CSE) between 2004 and 2015. This study employed panel data analysis to demonstrate that current profits, financial leverage, growth, liquidity, free cash flow, institutional stock holdings and economic conjuncture represent the main determinants of dividend policy of Moroccan listed firms. The results reveal that the level of expected earnings and past dividend patterns does not influence dividend policy. The findings offer analysts, investors and academicians a valuable tool to understand how CFOs, CEOs, and board of directors design dividend policy. Moreover, given the severity of agency problems in CSE and the role of dividend policy in reducing agency problems, understanding the factors influencing dividend policy is fundamental for investors trading in this market.

Dividend policy of firms listed on Casablanca Stock Exchange: a panel data analysis

This study attempts to identify the main determinants of dividend policy and evaluate the theories that better explain the dividend behaviour of Moroccan listed firms. Data consists of all non-financial firms listed on Casablanca Stock Exchange (CSE) between 2004 and 2015. This study employed panel data analysis to demonstrate that current profits, financial leverage, growth, liquidity, free cash flow, institutional stock holdings and economic conjuncture represent the main determinants of dividend policy of Moroccan listed firms. The results reveal that the level of expected earnings and past dividend patterns does not influence dividend policy. The findings offer analysts, investors and academicians a valuable tool to understand how CFOs, CEOs, and board of directors design dividend policy. Moreover, given the severity of agency problems in CSE and the role of dividend policy in reducing agency problems, understanding the factors influencing dividend policy is fundamental for investors trading in this market.

A Study on Dividend Pattern of Indian Corporate Firms

The study undertaken investigated the dividend pattern and trend of Indian corporate firms for the period from 2002-2014. Dividend payment has always been considered as an important decision by corporates. It has been observed that many firms believe that paying dividend does not affect the value of firms, and many assure that dividend payment does enhance the wealth of shareholders. This study attempted to examine what has been the dividend trend of the Indian firms over a period of 12 years. Analysis of dividend trends for a large sample of stocks traded on the Bombay Stock Exchange (BSE) indicated that the percentage of companies paying dividends increased by 28% over a period of 12 years. The number of companies who were in the non-payer group declined by 51%, which indicated that firms moved towards the paying group. t - test was also conducted between payer and non-payer groups, and it was observed that paying of dividend does make a difference to the profitability and other related factors to firms.

A Fisherian Approach to the Dividend Puzzle: Taxes, Consumption, and Risk Diversification

This paper presents an alternative theory explaining why firms adopt dividend policies of various kinds at intermediate levels. We extend the dividend clientele model from a traditional corner-solution framework to an interior-solution framework. For some investors, intertemporal double taxation and transaction costs produce a V-shaped function that is inflected at the point where the dividend payment just satisfies the investor's current liquidity needs. Because, generally speaking, clientele effects and risk diversification are not completely compatible, a firm's dividend pattern is expected to be consistent with the median shareholder's intertemporal consumption allocation when consumption preferences dominate tax preferences for majority shareholders.

Dynamics of Dividend Payout in Emerging Stock Markets: Evidence from Public Firms at Nairobi Securities Exchange, Kenya

Dividend decisions are central to corporate finance because of its relationship with firm value, finance and investment. Emerging stock markets like the Nairobi Securities Exchange have been hypothesized to exhibit unpredictable dividend behavior by some finance scholars. The thesis is guided by the hypothesis that emerging market firms following dividend pattern different from that of developed stock markets and that determinants of payout exhibit different behavior in different stock exchanges. A mixed design involving panel data from 40 firms over the period 2000 to 2010 and cross section data from finance officers of 40 firms provide evidence of dividend dynamics for quoted companies at the exchange. Panel data estimation techniques along with logistic regression are applied in analysis and testing of hypotheses at 0.05 level based on firm and industry characteristics. Conclusions include; dividends payout by listed firms at the NSE are influenced and predicted mainly by prior dividends (73%) followed by changes in current after tax earnings (3.5%) and lastly business risk to a lesser extent. Secondly, three companies consistently paid significantly higher dividends than their peers in the study period. Thirdly, majority of corporate managers do not smooth dividends when distributing earnings. Forth, Fama and Babiak (1968) dividend model best explains dividend behaviour of NSE firms compared to Lintner (1956) model. Fifth dividend payout in this market is explained by agency cost, signaling and information asymmetry theories. Lastly industry and time effects have no link to dividend decisions of firms in the market. Recommendations include; Shareholders and new investors at NSE should consider prior dividends and earnings changes when making choices about which stock(s) to buy. Dividend payout need to be stabilized by corporate managers to enhance value especially by firms in sectors facing high risk and growth prospects. More so dividend paying firms are preferred by investors to non-paying firms and that changes in dividends elicit excitement among investors compared to keeping dividend unchanged. Finally management of three firms namely Bamburi Cement, Kapchorua Tea and BOC Ltd possess superior talent compared to other firms in their respective industries.

The Impact of Growth Prospect, Size and Leverage on Dividend Behavior of Nepalese Commercial Banks

This study examines the impact of growth prospect, leverage and firm size on dividend behavior of Nepalese commercial banks.The dividend variables selected in the study are calculated in terms of dividend per share (DPS), dividend yield (DVY) and dividend payout ratio (DPY). The major independent variables taken are size, leverage and growth prospects while for robustness, other variables are also taken which are profitability, lagged dividends, bank risk and inflation. The data are collected from annual reports of selected commercial banks and bank supervision reports published by Nepal Rastra Bank while the data for inflation has been extracted from the World Bank reports.The study is based on 146 observations from 19 commercial banks in Nepal from 2006-2014. The regression models are estimated to test the significance and importance of dividend patterns in Nepalese commercial banks. The result shows that there is a positive relationship of dividend payouts with size, profitability and lagged dividends. It implies that higher the values of size, profitability and lagged dividends, higher would be the dividend payouts of Nepalese commercial banks. In contrast, growth prospect, leverage and P/E ratio have a negative impact on the dividend patterns. It reveals that an increase in the growth prospect, leverage and P/E ratio leads to lower dividend payments of the Nepalese commercial banks. The beta coefficient is positively significant for size, profitability and lagged dividends whereas the beta coefficient is negatively significant for growth prospect, leverage and P/E ratio. The study also concludes that the dividend behavior of Nepalese commercial banks follow the Lintner model of dividend payments.

Comparing dividend puzzle solutions by Polish, Canadian, Norwegian and American executives

This study compares firms’ dividend policy antecedents in four countries. The author surveys managers of 230 companies listed on the Warsaw Stock Exchange that paid dividends over the 2001-12 period and compares the findings to survey reports from the USA, Canada, and Norway. The main antecedents of dividend policy in these countries are the level of current earnings, their stability over time, the level of expected earnings and the pattern of past dividends. The last factor is of little importance for Polish managers, as the history of dividend payouts in Polish-listed companies is brief. The establishment of factors that shape the dividend policy in public companies has crucial importance in global financial markets. Investors make cash transfers to markets that ensure a high return on invested capital. Orders from foreign investors generate almost 50% of the turnover on the Warsaw Stock Exchange. Therefore, in their decisions on the division of earnings, Polish companies should be guided by similar considerations as those displayed by companies in developed economies that seek to attract foreign investors. The study expands on the existing survey research on dividends and provides new evidence from managers of companies in Poland.

The St. Petersburg paradox and capital asset pricing

Durand (J Finance 12:348–363, 1957) shows that the classical St. Petersburg paradox can apply to the valuation of a firm whose dividends grow at a constant rate forever. To capture a more realistic pattern of dividends, we model the dividend growth rate as a mean reverting process, and then use the capital asset pricing model to derive the risk-adjusted present value. The model generates an equivalent St. Petersburg game. The long-run growth rate of the payoffs (dividends) is dominant in driving the value of the game (firm), and the condition under which the value is finite is less restrictive than that of the standard game.

Dividend Smoothing in a Multi-Period Model of Signaling with Moral Hazard

This paper helps to explain the dividend patterns of large corporations by presenting a dynamic model where payout based incentives simultaneously mitigate opportunistic actions (perquisites) and induce managers to convey inside information to the market. Incentive compatibility links the manager’s marginal cost of dividends to her marginal utility from perquisites. To induce value revelation (signaling), perquisites must increase with performance. Higher perquisites, however, reduce cash flows (precisely what dividends signal), leading to dividend payments that are smoothed relative to current earnings, total expected cash flows, and share prices, as well as smoothed across time. This smoothing is established for the set of incentive functions that control simultaneous adverse selection and moral hazard via the first order approach to managerial decision-making.

Managerial actions and nominal stock price levels

We examine nominal and real stock prices and the sequential price pattern of stock dividends and stock splits. We find that the average stock price has been fairly stable over time except for two decades in the beginning and end of the twentieth century. Inclusion of these periods yield a decline over time which is generally consistent with the drop in price levels found by Chittenden et al. [2010. “A Note on Affordability and the Optimal Share Price.” Financial Review 45: 205–216]. In a multivariate setting, the frequency of stock dividends and stock splits is positively related to the frequency for these events the prior year and recent market return. In further tests of the price change we find a positive relationship to the median price change for stock dividends/splits and negatively to labour income growth for stock splits. These findings indicate that stock price reduction via stock dividends and splits attracts individual investors as income grows. One key conclusion is that the primary reason for any stock action, dividend or split, is to fit the ‘norm’ stock price level of the market.