Level Of Dividend Payout Research Articles

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.

The role of Business Group Affiliation on the Determination of Firm's Dividend Policy Decisions: Evidence from India

This research article examines the role of business group affiliation on the determination of firm’s dividend policy decisions (i.e. dividend payment decision and dividend payout level decision) for 703 National Stock Exchange (NSE) listed Indian firms during 1995-2018. In order to analyze the dividend payment decision (i.e. whether to distribute or not to distribute dividend?) a dichotomous logit regression analysis is utilized on the other hand, for the purpose of analyzing the dividend payout-level decision (i.e. how much amount of dividend to be distributed out of total earnings?) a tobit or censored regression analysis is utilized. The study finds from the comparative analysis that the dividend payout ratios of firms affiliated with the business groups are higher than that of unaffiliated firms (i.e. standalone firms). The econometric analysis indicates that the firms’ affiliation with the business groups have a direct association with the likelihood of firms paying dividends. The firms affiliated with the business groups are more likely to distribute dividends and their dividend payout levels are higher than the unaffiliated firms (i.e. standalone firms). The dividend policy decisions of business group affiliated firms are less sensitive to size, profitability, investment opportunities, financial leverage and firm’s life-cycle stage on the other hand, they are more sensitive to free cash flow and business risk.

Carbon risk and dividend policy: Evidence from China

Using a large sample of Chinese listed industrial firms from 2009 to 2019, this study investigates the effect of firm-level carbon risk on dividend policy. We find that carbon risk has a significant and negative impact on a firm's dividend payout level. We also find that when firms' capability in innovation is stronger, the degree of earnings uncertainty is higher, a firm belongs to high‑carbon industries, the negative relationship between carbon risk and dividend payout level is more significant. Furthermore, financial constraints and cash holdings are two underlying channels through which carbon risk affects cash dividend payouts. Our findings remain consistent across several robustness checks.

The Impact of Ownership Structure on Dividend Pay-out: Evidence from Listed Companies in the Property Sector in Malaysia

This study investigates the relationship between the ownership structure and the dividend payout for listed firms in the property sector in Malaysia. By examining the correlations between different forms of ownership and the proportions of shareholdings held by a variety of ownership categories, this will help to provide a better picture about how the ownership structure of the companies actually affects the dividend decisions of companies.
 46 listed companies from the Malaysian property sector are selected as the sample for this study, between the years 2011 and 2016. This study uses the random effect regression model to express the relationship between the ownership structure and the level of dividend payout for the relevant sample. The dependent variable is the dividend payout amount, and the independent variables include ownership concentration, institutional ownership, managerial ownership, and foreign ownership. Meanwhile, the control variables are firm size and firm leverage. Agency theory, signaling theory, Bird-in-the-Hand theory, and clientele effect theory, are used in this study. Our results show that ownership concentration and institutional ownership have a positive and significant relationship with dividend payout in Malaysia. By contrast, managerial ownership and foreign ownership revealed an insignificantrelationship with the dividend payout. This study may be useful to both academics and professionals in the property and investment segments of developed and developing economies, and concludes with recommendations on potential for future legal and regulatory implications of the findings.

Financial reporting quality and dividend policy: New evidence from an international level

This study examines the link between financial reporting quality and dividend payout across 76 countries. We find that financial reporting quality increases dividend payout after controlling for firm and country specifics. We also investigate different channels that moderate the relation between financial reporting quality and dividend payout. We find that the positive association between high-quality financial reporting and dividend payout is more pronounced when firms have free cash flow problems, face severe information asymmetry, and are located in countries with weaker minority shareholder protection rights. Interestingly, we find evidence that high reporting quality enhances firms' payment of dividend even when these firms already overpaying their shareholders. However, the relation becomes weaker when firms overpass the optimal level of dividend payout. The findings remain consistent after several robustness checks, thus highlighting the effectiveness of more transparent disclosure of financial information in reducing information asymmetry related to firms' internal agency costs and their relationships with external parties.

Board busyness and new insights into alternative bank dividends models

This study examines the possible opposing effects of the board function of busyness (i.e. the presence of busy independent non-executive directors serving on multiple boards) on bank dividend payout patterns between two alternative payouts models (i.e. conventional and Islamic). Using an international sample for listed banks during the periods of 2006–2018, we show that the busyness of boards of directors can explain differential dividend payouts behaviour between two banking systems. For conventional banking dividend model, a busy board has a significantly positive impact on the bank’s dividend payout level. However, during the financial crisis of 2007/2009, the positive impact of board busyness on dividends payouts is tempered for these banks. In contrast, Islamic banks operating under a more constrained dividend model, report significantly lower levels of payouts and lower likelihood when they have busy directors on board. We find insignificant evidence for the effect of the financial crisis in Islamic banks. These results highlight a potential challenge for the unique agency conflicts arising from the complex payout model of Islamic banks (in terms of profit distribution principles, motives, mechanics and techniques, and flexibility of payouts), which is subject to the demand for greater monitoring and additional rulings when compared to the conventional.

Boardroom gender diversity and dividend payout strategies: Effects of mergers deals

AbstractOur study examines the effects of mergers and acquisitions deals on the relationship between female leadership and dividend strategies for 90 UK listed firms during the period 2006–2016. Results indicate that firms with a larger proportion of female directors serving on the board are more likely to pay higher dividends, but this positive finding is weaker when the firms experienced a higher number of mergers and acquisitions deals. Interestingly, extended analyses on female directors' positions show the opposing effects of female Chairmen and female CEOs on a firm's payout strategies. Although a female Chairman is associated with higher dividend payout levels, a female CEO shows an adverse impact. Yet these results tend to be reversed for firms with more merger and acquisition transactions. Our findings make a significant contribution to a trendy but relatively limited and inconclusive topic that links gender diversity to scrutiny intensity.

World dividends and tax shocks

For a sample of 28,895 firms across 30 countries and 29 years, there is a negative relation between dividend tax rates and dividend payout. Firms increase dividend payout in response to both absolute and relative (to capital gains tax rates) decreases in dividend tax rates. This negative relation is robust to both increases and decreases and both shocks and continuous variation in dividend tax rates and affects both dividend payer status and dividend payout level. However, dividend payers do not increase dividend payout levels following decreases in dividend tax rates. The negative relation between dividend tax rates and dividend payout is stronger in countries and firms with better governance and suggests a dividend taxation elasticity of −0.45.

The effect of dividend payouts on future earnings

The conventional expectation of the relationship between the level of dividend payout and future earnings growth, based on established finance theories, is that it is negative. This expectation stems from the perceived attractiveness of having enough available retained earnings to fund any potential future growth opportunities. However, research performed in various markets at the turn of the century has challenged this belief. This paper seeks to update this theory by investigating the relationship in a more current dataset, from 1988 to 2014. Furthermore, given the investment opportunities within emerging markets, the dataset pertains to South African listed companies. Assessing two different earning measures, over multiple years, a multivariate regression analysis revealed a statistically significant positive relationship between dividend payout and future earnings. Dividend payout decisions are seen by investors as a predictor for future value growth and, as such, management should be aware of their associated dividend distribution decisions.

The effect of dividend payouts on future earnings

The conventional expectation of the relationship between the level of dividend payout and future earnings growth, based on established finance theories, is that it is negative. This expectation stems from the perceived attractiveness of having enough available retained earnings to fund any potential future growth opportunities. However, research performed in various markets at the turn of the century has challenged this belief. This paper seeks to update this theory by investigating the relationship in a more current dataset, from 1988 to 2014. Furthermore, given the investment opportunities within emerging markets, the dataset pertains to South African listed companies. Assessing two different earning measures, over multiple years, a multivariate regression analysis revealed a statistically significant positive relationship between dividend payout and future earnings. Dividend payout decisions are seen by investors as a predictor for future value growth and, as such, management should be aware of their associated dividend distribution decisions.

REIT dividend payout: evidence from the Asia market

Previous studies of real estate investment trust (REIT) dividend policies have focused primarily on REITs listed in the USA. These studies found that REITs in the USA usually distribute dividends not bounded by the tax regulation requirement. The dividend distribution by REIT is negatively related to firm performance including return on assets and growth in earnings. Furthermore, the managers tend to take advantage of the weak monitoring by paying lower dividends. This study focusses on the new emerging REIT market to examine the determinants of REIT dividend payout (selected from five countries or regions in Asia). The preliminary findings demonstrate that the dividend payout level for these REITs is negatively associated with returns on assets which support the agency cost theory. The results also show that the dividend payout level is negatively correlated with board size, which indicates that REITs pay low dividends with weak internal governance monitoring. The effective servicing of these emerging markets may help to ensure quality practices and accountability in these rapidly developing markets.

Dividend Policy Decisions in India: Standalone Versus Business Group-Affiliated Firms

This study examines the determinants of two important dividend policy decisions specifically the dividend payment decision and the dividend payout level decision of 781 sample Indian firms enlisted on National Stock Exchange (NSE) over the period, 1995–2015, comparing the business group-affiliated firms with the standalone firms. In term of characteristics, the business group-affiliated firms are larger, more profitable and more levered than the standalone firms. The empirical results suggest that the dividend policy decisions of business group-affiliated firms differ significantly from that of the standalone firms. In the case of standalone firms, the firms with high investment opportunities, high financial leverage and high business risk are less likely to pay dividends, and their dividend payout levels are lower. On the other hand, the firms affiliated with business groups are more likely to pay dividends, and their dividend payout levels are higher even when they have high investment opportunities, high financial leverage and high business risk. Overall, the findings suggest that although the business groups are able to create internal capital markets (ICMs) and shield their member firms from market imperfections, they may suffer from other information asymmetry problems.

Corporate governance and dividend pay-out policy in UK listed SMEs

PurposeThe purpose of this paper is to examine the extent to which corporate board characteristics influence the level of dividend pay-out ratio using a sample of UK small- and medium-sized enterprises from 2010 to 2013 listed on the Alternative Investment Market.Design/methodology/approachThe data are analysed by employing multivariate regression techniques, including estimating fixed effects, lagged effects and two-stage least squares regressions.FindingsThe results show that board size, the frequency of board meetings, board gender diversity and audit committee size have a significant relationship with the level of dividend pay-out. Audit committee size and board size have a positive association with the level of dividend pay-out, whilst the frequency of board meetings and board gender diversity have a significant negative relationship with the level of dividend pay-out. By contrast, the findings suggest that board independence and CEO role duality do not have any significant effect on the level of dividend pay-out.Originality/valueThis is one of the first attempts at examining the relationship between corporate governance and dividend policy in the UK’s Alternative Investment Market, with the analysis distinctively informed by agency theoretical insights drawn from the outcome and substitution hypotheses.

Corporate Governance and Dividend Pay-Out Policy in UK Listed SMEs: The Effects of Corporate Board Characteristics

Purpose: This paper examines the extent to which corporate board characteristics influence the level of dividend pay-out ratio using a sample of UK small and medium-sized enterprises (SMEs) from 2010 to 2013 listed on the Alternative Investment Market. Design/methodology/approach: The data is analysed by employing multivariate regression techniques, including estimating fixed effects, lagged effects and two-stage least squares regressions. Findings: The results show that board size, the frequency of board meetings, board gender diversity and audit committee size have a significant relationship with the level of dividend pay-out. Audit committee size and board size have a positive association with the level of dividend pay-out, whilst the frequency of board meetings and board gender diversity has a significant negative relationship with the level of dividend pay-out. By contrast, the findings suggest that board independence and CEO role duality do not have any significant effect on the level of dividend pay-out. Originality/value: This is one of the first attempts at examining the relationship between corporate governance and dividend policy in the UK’s Alternative Investment Market, with the analysis distinctively informed by agency theoretical insights drawn from the outcome and substitution hypotheses.

Triangle Relationships among Ownership Structure, Dividend Policy and Firm Performance: An Empirical Study in Vietnamese Companies

This paper studies the triangle relationships among ownership structure, dividend policy and firm performance by investigating 34 Vietnamese companies in Construction and Construction Material industries which are listed on Hanoi Stock Exchange, Ho Chi Minh Stock Exchange, and UPCOM Stock Exchange over the period from 2011-2013. The paper studies ownership concentration, dividend payout ratio, and two measures of firm performance, namely Price to Earnings (P/E) ratio and Return on Asset (ROA). Pooled Ordinary Least Squares Model and Fixed Effect Model were used to examine three relationships between: (i) ownership concentration and dividend policy, (ii) dividend policy and firm performance, and (iii) ownership concentration and firm performance. Ownership concentration is found to increase the level of dividend payout. Dividends are positively correlated with both P/E ratio and ROA. Finally, ownership concentration is found to have negative impacts on P/E ratio but no significant impacts on ROA.

Shareholder Protection, Ownership, and Dividends: Russian Evidence

ABSTRACTThis article investigates the relation between corporate governance mechanisms and dividend policy in Russian firms. Using a sample of Russian listed firms over the period 1998–2003, we estimate models for dividend pay probability and payout size. We find that there has been a significant increase in dividend payout levels which coincide with improvements in legal shareholder protection. State controlled firms are more frequent dividend payers as compared to other majority owned firms. We also find that dual share firms, in which corporate charters protect minority interests, have a higher dividend pay probability; while firms reporting according to US GAAP, which may be less likely to manipulate earnings, have a lower dividend payout.

Corporate governance ratings and the dividend payout decisions of Australian corporate firms

Purpose – The purpose of this paper is to examine the influence of corporate governance on the dividend payout decisions of Australian firms by considering two related objectives. First, it considers the role of corporate governance ratings (CGRs) on the decision to pay or not to pay dividends. Second, it considers the influence of CGRs on the average dividend payout level of Australian firms. Design/methodology/approach – The sample consists of 413 non-financial firms included in the All Ordinaries Index for the period 2004-2009. A logit model is employed to analyse the decision to pay or omit dividends. Similarly, tobit method is employed to analyse the factors influencing the dividend payout level of Australian firms. To control for unobserved heterogeneity, this study employs random effects panel logit and panel tobit models. Findings – This study finds that CGRs have a significant positive influence on the decision to pay dividends and on the average dividend payout level of Australian firms. Similarly, the present study finds support for signalling hypothesis as profitability has a significant positive influence and a loss dummy has a significant negative influence on the dividend payout decisions of Australian firms. The study also finds support for the life cycle hypothesis as growth opportunities have a significant negative impact on the average dividend payout level of Australian firms. This study finds no conclusive evidence of the existence of dividend tax clientele in Australia. Research limitations/implications – Dividends provide a complementary governance role consistent with the “outcomes model” of the agency cost theory as proposed by La Port et al. (2000). Practical implications – The findings have implications for corporate governance policies. Principle-based governance mechanisms work as well as the rule-based governance mechanisms in an environment characterized by high levels of investor protection and well-developed stock markets. Companies that are well governed may limit the opportunities for managers to expropriate shareholders and thus governance may reduce the contracting costs associated with compensation policies. Originality/value – This is the first study that examines the influence of governance on dividend policy using the CGRs developed by the WHK Horwath/University of Newcastle. Findings are robust and account for unobserved heterogeneity as random effects panel models are employed.

Gender Differences in Financial Reporting Decision Making: Evidence from Accounting Conservatism

AbstractThis paper investigates the effect of CFO gender on corporate financial reporting decision making. Focusing on firms that experience changes of CFO from male to female, the paper compares the firms' degree of accounting conservatism between pre‐ and post‐transition periods. We find that female CFOs are more conservative in their financial reporting. In addition, we find that the relation between CFO gender and conservatism varies with the level of various firm risks, including litigation risk, default risk, systematic risk, and CFO‐specific risk such as job security risk. We further find that the risk aversion of female CFOs is associated with less equity‐based compensation, lower firm risk, a higher tangibility level, and a lower dividend payout level. Overall, the study provides strong support for the notion that female CFOs are more risk averse than male CFOs, which leads female CFOs to adopt more conservative financial reporting policies.

World Dividends and Tax Shocks

For a sample of 28,895 firms across 30 countries and 29 years, there is a negative relation between dividend tax rates and dividend payout. Firms increase dividend payout in response to both absolute and relative (to capital gains tax rates) decreases in dividend tax rates. This negative relation is robust to both increases and decreases and both shocks and continuous variation in dividend tax rates and affects both dividend payer status and dividend payout level. However, dividend payers do not increase dividend payout levels following decreases in dividend tax rates. The negative relation between dividend tax rates and dividend payout is stronger in countries and firms with better governance and suggests a dividend taxation elasticity of −0.45.

Gender Differences in Financial Reporting Decision-Making: Evidence from Accounting Conservatism

This paper investigates the effect of CFO gender on corporate financial reporting decision-making. Focusing on firms that experience changes of CFO from male to female, the paper compares the firms' degree of accounting conservatism between pre- and post-transition periods. We find that female CFOs are more conservative in their financial reporting. In addition, we find that the relation between CFO gender and conservatism varies with the levels of various firm risks such as litigation risk, default risk, systematic risk, and CFO specific risk such as job security risk. We further find that risk-aversion of female CFOs is associated with less equity-based compensation, lower firm risk, higher tangibility level, and lower dividend payout level. Overall, the study provides strong support for the notion that female CFOs are more risk averse than male CFOs, which leads female CFOs to adopt more conservative financial reporting policies. Keywords: Accounting Conservatism; Gender; CFO; Risk-Aversion. JEL Classification: M41; J16