Level Of Dividend Payout Research Articles

Ownership structure and dividend policy evidence from the Tehran stock market

The major purpose of this paper is to identify and analyse the influence of concentrated ownership and institutional ownership on dividend policy for Chemical and Medical firms listed on the Tehran Stock Exchange (TSE) from 2002 to 2008. We used multiple regressions to examine the influence of ownership structure on dividend per share (DPS). The ownership structure variables used in this study include concentrated ownership and institutional ownership, while the control variables include free cash flow (FCF), leverage (Lev), growth opportunities (Q), and firm size. In order to test the hypotheses, the required data and information were collected from the annual reports of the official bulletins of the Tehran Stock Exchange (TSE), market information, stock organization library, and stock sites such as www.rdis.ir and www.irbourse.com. Based on a sample size of 35 chemical and medical firms listed on the TSE from 2002 to 2008, we found out that dividend payout is positively associated with concentrated ownership and institutional ownership. The results suggest that firms with high FCF, low leverage, low growth opportunities and higher size have higher distributed dividend level. For assistance to market analysts and other investors, regarding act to optimal investments and decisions, from an understanding of relationship between firm’s ownership structure and dividend payout level. Key words: Dividend policy, ownership structure, large shareholder, free cash flow, agency costs.

An analysis of stock repurchase in Taiwan

We show that the specific regulation in Taiwan requiring firms to repurchase shares explicitly to resolve the information ambiguity does not prevent market underreaction by the evidences of positive short-term and long-term abnormal return. In addition, firms that retire their buybacks show a superior long-term performance than those that reissue the buybacks. Our results show that the long-term price performance is positively related to firms' operating performance and dividend payouts in the post-repurchase period. Further analysis indicates that the market reacts asymmetrically to the changes of firms' operating performance and dividend payout level.

Corporate governance in Taiwan: The nonmonotonic relationship between family ownership and dividend policy

This study considers an important aspect of corporate governance: the relationship between cash flow rights and dividend payout policy of listed family firms in Taiwan, an economy characterized by a predominance of family-controlled firms. Dividend payout levels are important because they are crucial to governing the firm and managing its investments. The empirical results show that at a low level of controlling families’ cash flow rights, the threat to lose control at any time makes controlling families claim more in dividends. This yields a positive relationship between dividend payout and the cash flow rights of controlling families at this level. Meanwhile, at a moderate level of controlling families’ cash flow rights, the entrenchment effect becomes more robust and creates a negative relationship with dividend payout. Finally, at the very highest level of controlling families’ cash flow rights, excessive firm-specific risk again helps to again create a positive relationship. This nonmonotonic relationship between controlling family cash flow rights and dividend payout also holds for financially mature firms that have a high earned to contributed capital mix.

CEO Overconfidence and Dividend Policy

We develop a model of the effect of CEO overconfidence on dividend policy and empirically examine many of its predictions. Consistent with our main prediction, we find that the level of dividend payout is lower in firms managed by overconfident CEOs. We document that this reduction in dividends associated with CEO overconfidence is greater in firms with lower growth opportunities, lower cash flow, and greater information asymmetry. We also show that the magnitude of the positive market reaction to a dividend-increase announcement is lower for firms managed by overconfident CEOs. Our overall results are consistent with the predictions of our model.

CEO Overconfidence and Dividend Policy: Theory and Evidence

We develop a model of the dynamic interaction between CEO overconfidence and dividend policy. The model shows that an overconfident CEO views external financing as costly and hence builds financial slack for future investment needs by lowering the current dividend payout. Consistent with the main prediction, we find that the level of dividend payout is about one-sixth lower in firms managed by CEOs who are more likely to be overconfident. We document that this reduction in dividends associated with CEO overconfidence is greater in firms with lower growth opportunities and lower cash flow. We also show that the magnitude of the positive market reaction to a dividend-increase announcement is higher for firms with greater uncertainty about CEO overconfidence.

CEO overconfidence and dividend policy

Abstract We develop a model of the dynamic interaction between CEO overconfidence and dividend policy. The model shows that an overconfident CEO views external financing as costly and hence builds financial slack for future investment needs by lowering the current dividend payout. Consistent with the main prediction, we find that the level of dividend payout is about one-sixth lower in firms managed by CEOs who are more likely to be overconfident. We document that this reduction in dividends associated with CEO overconfidence is greater in firms with lower growth opportunities and lower cash flow. We also show that the magnitude of the positive market reaction to a dividend-increase announcement is higher for firms with greater uncertainty about CEO overconfidence.

Do Managerial Motives Impact Dividend Decisions in REITs?

Conflict of interest between shareholders (principal) and managers (agent) is a potential weakness of the modern corporate form. Various monitoring mechanisms—pay for performance compensation schemes, mix of cash compensation and long term compensation, the independence of the board of directors, the market for takeovers, and capital structure—have been developed to discipline management and motivate them to maximize shareholder wealth. We test the hypothesis that dividend payout levels reflect the quality of and motivation for managerial decision making and are a function of performance and monitoring effectiveness. Consistent with this hypothesis, our analyses indicate that dividend payout, and dividend yield are functions of corporate performance, board structure, CEO tenure, and CEO ownership of company shares.

The Coupling of Ownership and Control and the Allocation of Financial Resources: Evidence from Hong Kong

Theoretical and empirical research regarding the impact of corporate ownership on the behaviour and performance of firms have typically focused on consequences stemming from the separation of ownership and control. While large scale business enterprise characterized by such a separation is dominant in the US, Japan and the UK, firms in which ownership and control is coupled in the hands of individuals and their families are apparent in many other large developed economies and are dominant in most emerging markets. This paper examines consequences regarding the generation and allocation of financial resources stemming from the coupling of ownership and control among Hong Kong based firms. In doing so, we join insights from the economics literature regarding the incentive and risk bearing consequences of coupled ownership and control with the extant management, sociology and history literatures regarding Chinese family business groups and develop and six hypotheses pertaining to patterns in the allocation of financial resources. Results indicate that coupled ownership and control is positively related with dividend payout levels and financial liquidity while it is negatively related to investments in capital expenditures. Consistent with these results, we also find that coupled ownership and control is positively related to short‐term (accounting) profitability.

An Investigation of the Dynamic Relationship between Agency Theory and Dividend Policy

AbstractAgency theory posits that the dividend mechanism provides an incentive for managers to reduce the costs associated with the principal/agent relationship. Distributing resources in the form of cash dividends forces managers to seek outside capital, thus causing them to reduce agency costs as they subject themselves to the scrutiny of the capital marketplace. Under this scenario the optimum level of dividend payout is that which minimizes the agency cost structure relative to the cost of raising needed funds. A test of this theory employing time‐series cross‐sectional analysis and more direct measures of the agency cost structure shows that these tenets of agency theory may be valid. Managers do appear to adjust the dividend payout in response to the agency cost/transaction cost structure, both through time as well as across firms.

Corporate Financial Decision Making in Canada

AbstractThis paper presents the results of a survey of chief executive officers and chief financial officers of large Canadian companies. We report on the state of corporate financial decision making in Canada, based on responses of 133 respondents.Our results indicate that most surveyed firms follow standardized methods of capital budgeting, with internal rate of return and payback period dominating the net present value method. However, forecasting methods are still dominated by subjective management estimates and expert opinions. Consensus rather than mathematical modelling seems to be the norm. Although the weighted average cost of capital seems to be the preferred discount rate in evaluating investment decisions, about 25 percent of the firms, including some public firms, use cost of debt as their cost of capital. The determination of cost of equity capital still seems to be mainly judgemental, followed closely by the use of accounting rates of return. A surprisingly low number of firms indicate the use of theoretical models such as the CAPM or the dividend growth model in the estimation process. Cost of financing continues to be a concern for Canadian firms and there is an overall perception that the cost of financing is high irrespective of the source of financing.Our overall results indicate that significant challenges lie ahead for corporate management in Canada and its ability to be internationally competitive. In spite of the well‐developed capital markets, executives in our survey indicate a disturbingly high perceived differential between the cost of internal and external financing, and a very low use of analytical methods.RésuméLes auteurs présentent les résultats d'un sondage auprès de chefs d'entreprises et de chefs de services financiers d'importantes compagnies canadiennes. Ils font état des décisions financières prises au Canada d'après les réponses au sondage de 133 répondants.Les résultats indiquent que la plupart des compagnies répondant au sondage utilisent des méthodes d'établissement de budget des investissements standardisés. Les méthodes du taux de rendement interne et de période de récupération dominent sur la méthode de la valeur actualisée nette. De plus, les méthodes de prévision sont encore dominées par l'opinion subjective des gestionnaires et les opinions des experts. La norme semble ětre le consensus au lieu de l'utilisation des moděles mathématiques. La méthode du coǔt moyen pondéré semble ětre la méthode préférée du coǔt du capital, mais, auprès de presque 25% des compagnies, incluant certaines compagnies publiques, le coǔt des frais d'emprunt comme leur coǔt du capital est utilisé. Le calcul du coǔt du capital semble encore ětre calculé d'une façon subjective suivi de très près par l'utilisation du taux de rendement comptable. Un montant peu élevé de compagnies se servent de modèles théoriques tel que le modèle d'équilibre des marchés financiers ou du modèle de croissance des dividendes dans le processus d'estimation. Le coǔt du financement semble ětre une préoccupation pour les compagnies canadiennes et la perception générale est que le coǔt du financement demeure haut, indpendamment de la source de financement.Les résultats globaux indiquent qu'il y aura un défi important à relever pour les gestionnaires de compagnies au Canada ainsi que leurs habiletés à demeurer compétitifs sur le plan international. En dépit des marchés financiers bien développés, les cadres dans notre sondage ont indiqués un différentiel très élevé entre le coǔt de financement interne et externe, ainsi qu'une faible utilisation des méthodes analytiques.

Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy

This paper assumes that outside investors have imperfect information about firms' profitability and that cash dividends are taxed at a higher rate than capital gains. It is shown that under these conditions, such dividends function as a signal of expected cash flows. By structuring the model so that finite-lived investors turn over continuing projects to succeeding generations of investors, we derive a comparative static result that relates the equilibrium level of dividend payout to the length of investors' planning horizons.