Dividend Payout Policy Research Articles

Investor taxation, firm heterogeneity and capital structure choice

In this paper, we analyze the effect of investor level taxes, firm-specific ownership structure and firm-specific dividend payout policy on a firm’s capital structure choice. Our analysis is based on data for 10,003 firms from 11 Central and Eastern European (CEE) countries over the period 2002–2012. Our results show a significant positive impact from the net tax benefit of debt on the debt ratio of a firm. Ignoring firm heterogeneity, an increase in the net tax benefit of debt by 10 percentage points leads to an increase in the debt ratio of 2.68 percentage points. If we add firm-specific ownership to the analysis, the effect of investor level taxes on the debt ratio is about 1.55 times higher if the firm is wholly owned by a domestic individual investor. For the same type of firm, the effect nearly doubles if we also consider firm-specific dividend payout policy.

Determination of micro and macro factors affecting cash dividend payout policies by panel data analysis: A research on BIST 100 index

Amac - Firmalarin nakit kar payi dagitim politikalarina etki eden mikro ve makro faktorlerin belirlenmesi amaclanmistir. Borsa Istanbul 100 Endeksi’nde paylari devamli olarak islem goren ve mali sektorde faaliyet gostermeyen otuz uc firmanin 2010-2016 donemindeki verileri incelenmistir. Metodoloji - Nakit kar payi dagitim politikalari ile mikro ve makro faktorler arasindaki iliski panel veri yontemi kullanilarak analiz edilmistir. Yatay kesitler arasindaki farkli hata varyanslarinin yani sira korelasyon sorununa da cozum ureten White’in standart hatalarin duzeltilmesi yontemi kullanilmistir. Bulgular - Analiz sonucunda, nakit kar payi dagitim orani ile aktif karlilik orani, finansal kaldirac ve piyasa degeri arasinda anlamli ve pozitif iliski tespit edilirken; varlik yapisi, buyume firsati, firma buyuklugu ve enflasyon orani arasinda anlamli ve negatif iliski tespit edilmistir. Likidite orani, altin fiyati ve faiz orani ile nakit kar payi dagitim orani arasinda ise anlamli herhangi bir iliski bulunmamistir. Sonuc- Calismadan elde edilen bulgularin, eldeki kus, vergi etkisi, sinyal ve temsil maliyeti teorilerini destekledigi belirlenmistir.

Does foreign currency-denominated debt affect dividend payout policy? Evidence from Korea

This study examines the effect of foreign currency-denominated debt on dividend payouts in the context of risk hedging and debt financing costs. We find that firms with a higher proportion of foreign currency debt are more likely to pay dividends; furthermore, we also find that these firms pay higher dividends. We further find that the positive relation between the proportion of foreign currency debt and dividend payouts is more pronounced in firms with lower credit risk and cash flows than their counterparts. Our results are robust to alternative estimation methods, endogeneity concerns, and alternative proxies for foreign currency debt and dividend payouts.

Does CEO inside debt compensation benefit both shareholders and debtholders?

We examine whether the proportion of CEO inside debt holdings (pension and deferred compensation) to stock holdings benefit both shareholders and debtholders by relating CEO inside debt to a firm’s dividend payout policies. Based on the positive association of CEO inside debt and the propensity and the size of the dividend payout, we find that firms paying their CEOs with large inside debt present the lower cost of debt and default risk, and these benefits transfer to better firm performance and valuation. Moreover, we find that CEO inside debt is related to superior firm performance only in dividend-paying firms. Dividends tend to increase when firms with high agency costs of equity use inside debt. We conclude that dividends serve as a channel through which CEO inside debt compensation mitigates both agency costs of debt and agency costs of equity.

Impact of gender dichotomy on dividend payout policy in listed Nigerian financial services firm

This paper examines the impact of gender dichotomy on dividend payout policy in listed Nigerian financial services firm. A random-panel data methodological approach underpins this study. The study ...

The Effects of Ownership Structure, Sub-Optimal Cash Holdings and Investment Inefficiency on Dividend Policy: Evidence From Indonesia

We investigate how a firm’s decision to hold excessive cash or to over-invest could influence its dividend payout policy in Indonesia. Additionally, we examine the association between corporate ownership structure and cash dividends. Using a data set of Indonesian listed firms for the period from 1995 to 2014, we find that excessive cash holding (over-investment) positively (negatively) affects a firm’s likelihood of paying dividends. Also, we find that family, foreign, state and institutional ownership have significantly negative links with dividends, which suggests the signals of expropriation of firms’ wealth by major shareholders. These findings strongly support the expropriation hypothesis that commonly applies to firms with higher level of concentration or to firms in a weak legal environment by which the rights of minority interests are put at risk by large shareholders.

Examining bank-specific determinants of the dividend payout ratio of Sub-Saharan Africa banks: the panel GMM approach

Dividend payout policy of banks has been the commonest dividend policy in commercial banks world-wide owing to the assumption that it will minimise agency costs in the banks. Hence, this study adopts the dynamic panel two-step system and differenced GMM in analysing the data of 250 commercial banks from 30 countries in Sub-Saharan Africa (SSA) for the period 2006 to 2015 to examine the determinants of the dividend payout ratio of these banks. The empirical results reveal that past year dividend is the most significant determinant of current year dividend. Taxation and capital adequacy ratio, which are the legal and regulatory factors considered, are found to be insignificant. Our findings reveal earnings-after-tax and leverage as being significant determinants of payout ratio in SSA banks. Hence, Lintner's model holds in SSA banks as a region and it is, therefore, recommended that it must be strictly followed in setting the dividend process of commercial banks in SSA.

Determinants of Dividend Payout Policy in Emerging Markets: Evidence from the ASEAN Region

This study examines the determinants of dividend payout policy by analyzing the behavior of 226 nonfinancial firms in three emerging markets in the ASEAN region from 2012 to 2016. The OLS regression model is employed to investigate the impacts of firms’ characteristics and countries’ factor on dividend payout decisions. The results show that the dividend payout is positively related with profitability. In contrast, growth opportunity has a negative effect on dividend payout. Other factors such as firm size, free cash flow, financial leverage and liquidity have little or no significant relationships with dividend payout decisions. A further contribution of this research is that it considers the impact of law on firms and their investor relationships. The results from this analysis reveal that firms in countries with higher investor protection tend to pay more dividends.

Dividend Policy and Firm’s Profitability: Evidence from Ethiopian Private Insurance Companies

In many rapidly growing economies and emerging markets like Ethiopia, the insurance companies are expected to play a crucial role. The dividend decision is one of the critical financial managementdecisions for firms. Dividend decision is also among the widely addressed and controversial issue in field of finance. The inconclusiveness of dividend theories and empirical studies on the relationship between firm’s profitability and dividend payout decisions is one of the most debatable topics inresearches. Hence, the objective of this study is to examine the relationship between dividend policy and Ethiopianprivate insurance company’s profitability and to contribute to the ongoing debate. To achieve the objective of this study, secondary data were collected from the Audited annual financial statements of 8 private insurance companies in Ethiopia, from year 2006-2015. The study used purposive sampling technique to collect the necessary data. Descriptive statistics and Pearson correlation matrix were used for data analysis. Paneldata andPooled OLS regression model were also employed for empirical testing. Return on Asset (ROA) used as a measurement of insurance company’s profitability (dependent variable) while dividend payout ratio used as the main explanatory variable. The controlling variables were firm size, tangibility and leverage. The findings of this study indicated that there is positive and significant relationship between profitability and dividend pay-out policy decision of Ethiopian private insurance companies. This result is also consistent with the Bird-in –the hand theory. The result also shows that leverage, size of insurance company and tangibility has relationship with profitability of insurance companies.

An analysis of dividend payout trends of select Indian Information Technology Companies

The subject matter of dividend policy has been an issue of interest in financial literature since the birth of the modern commercial corporations. Although, several academicians and researchers have attempted to solve this apparent issue and devise theories and models. Regardless of many studies conducted by financial economists, the issue of dividend policy still remains debatable issue. In this regard, an attempt has been made to explore the dividend policy adopted by the selected Indian IT companies. Further, the study examines the dividend payout trends of selected Indian IT companies. For this purpose, the dividend payout ratio (DPR) has been taken into account as the indicator of dividend policy. A sample of five IT companies listed at National Stock Exchange (NSE) have been selected by using convenience sampling with the indication of having continue profits, consequent to declare dividend regularly and availability of financial information during the study period i.e., 2008–09 to 2017–18. The empirical evidence from this study reveals that Infosys have adopted a liberal dividend payout policy and also have a good consistency in dividend payouts as compared to other companies of the Industry under study. Conversely, the Tech Mahindra has followed a more conservative dividend policy and also has highest degree of inconsistency in dividend payouts among the companies under study. Also, the study revealed that the Indian IT companies have followed irregular dividend payout pattern over the period under study.

Does dividend payout policy matter for firm performance in India

The present study determined the dividend behaviour and firm performance before and after financial crisis period by using Lintner's dividend policy model from the year 2000 to 2016. The findings of the study showed that after the crisis, firms are behaving conservatively. The study also indicated that investors are expecting consistent dividends from the firms during post crises period in comparison to the pre-crisis period. The study postulated that dividend behaviour of the Indian companies is sensitive to the changes in earnings. The study elucidated that dividend policy is relevant for firm performance and upsurge shareholder value.

Does dividend payout policy matter for firm performance in India

The present study determined the dividend behaviour and firm performance before and after financial crisis period by using Lintner's dividend policy model from the year 2000 to 2016. The findings of the study showed that after the crisis, firms are behaving conservatively. The study also indicated that investors are expecting consistent dividends from the firms during post crises period in comparison to the pre-crisis period. The study postulated that dividend behaviour of the Indian companies is sensitive to the changes in earnings. The study elucidated that dividend policy is relevant for firm performance and upsurge shareholder value.

Determinants of Dividend Policy by Information Technology (IT) Firms in the United States

This paper examines the determinants of dividend payout policy of seventy publicly traded information technology (IT) firms in the United States in 2017. More important, the standard dividend payout ratio is adjusted to include depreciation because IT firms have higher depreciation than the services sector. Thus, this higher depreciation rates may have an impact on dividend payouts by IT firms. To find out the determinants of dividend payout policy, general linear models (GLM) were estimated using for standard dividend payout and the adjusted dividend payout as the dependent variables. In the standard dividend payout regression, corporate tax and the market to book ratio have a positive relationship with the dividend payout. Operating cash flow, corporate profit, debt to equity ratio, size and sales has a negative relationship with dividend payout. Finally, the regression for the adjusted standard dividend payout showed the corporate tax, operating cash flows, profit and the market to book ratio have a positive relationship with the adjusted dividend payout. Debt to equity ratio, size, and sales has a negative relationship with adjusted dividend payout.

Pengaruh Manajemen Laba Terhadap Fee Audit dengan Kebijakan Pembayaran Dividen Sebagai Variabel Moderasi (Studi Empiris pada Perusahaan yang Terdaftar di BEI Tahun 2013-2016)

This study aims to examine empirically the effect of earnings management which is moderated by dividend payout policy on audit fee. This research uses agency theory. The sample was selected by using purposive sampling method, and get go companies listed in BEI 2013-2016. This research found that earnings Management has no effect on Audit Fee, Dividend Payout Policy cannot modereted the effect of Earning Management on Audit Fee, Based on the results of this study the authors suggest that management will voluntary disclosure audit fees because it makes this research and previous research difficult to find data regarding the audit fees because that so many things must be explored about audit fees.Keywords: audit fee, earnings management, dividend payout policy

CORPORATE GOVERNANCE AND DIVIDEND PAYOUT POLICY: BEYOND COUNTRY‐LEVEL GOVERNANCE

AbstractWe address the mixed empirical findings on how corporate governance affects dividend payout policy by analyzing a large sample of firms from 30 countries. Our results indicate that firms with better firm‐level governance pay more dividends, even after controlling for country‐level governance. However, this relation is pronounced only in countries with low shareholder rights. In addition, we find that when the shareholder rights index is high, firm‐level governance is unrelated to dividend payout in the full sample period. Finally, we show that in high‐shareholder‐rights countries, firm‐level governance changes its role from before to after the 2008–2009 financial crisis.

Dividend payout policy, family control, and institutional investors in an emerging country: The case of Mexico

<p class="Noindent"><span lang="EN-US">The dividend payout ratio and its volatility in firms listed on the Mexican Stock Exchange from the second quarter of 2009 to the first quarter of 2013 relate to corporate governance aspects. A structural equations model found that institutional investors avoid firms with high family intervention and prefer market risk despite greater volatility in dividend payouts. Similarly, the dividend payout volatility and market risk are positively related. Moreover, dividend payout is smaller in firms with high family intervention in management. Companies with a strong family control smooth their dividend payout and have a smaller number of institutional investors.</span></p>

Whose Taxes Matter?: The Effects of Institutional Ownership on Dividend Payout Policy Around Tax Rate Changes

Prior research finds that firms accelerate dividends into the period before tax rate increases, especially when insider ownership is high, thus reducing insiders’ taxes (Hanlon and Hoopes 2014). However, this research does not consider the preferences of other investors, many of which are tax-insensitive. First, ignoring insider ownership, we find that the likelihood and magnitude of dividend acceleration is lower for firms with high tax-insensitive institutional ownership, providing new evidence on the broad relation between shareholder taxes and dividend payout. Second, accounting for insider ownership, we find that dividend acceleration increases with insider ownership even when tax-insensitive institutional ownership is high, indicating managers’ preferences outweigh institutions’ preferences. Third, accounting for both insider ownership and institutions’ monitoring ability, we find that tax-insensitive dedicated institutions constrain insiders’ ability to accelerate dividends, particularly when acceleration costs are high. This suggests dedicated institutions play a part in monitoring potentially excessive and costly tax-motivated dividend payments made in managers’, not shareholders’, best interest. Overall, our results differ from several recent studies and provide important new insight into the relation between shareholder-level taxes and dividends.

The dividend payout policy and R&D for loss firms: evidence from South Korea

ABSTRACTThis paper examines the effect of research and development (R&D) on dividend payments for loss firms. Even though a firm’s positive earnings is the main factor of dividend payout policy, earnings is not the main factor for loss firms’ dividend policy. An increase in dividends affects a firm’s liquidity and may cause a loss of profitable investment opportunities, thus paying dividends when a firm has negative earnings can be quite costly. Given the increase of loss firms with dividend payouts in Korea, this paper explores whether R&D is crucial for paying dividends among loss firms. We expect that loss firms with high R&D intensity are more likely to pay dividends to signal their future prospects. Using the sample from South Korean firms over 2002–2013, we find evidence that is consistent with our prediction. It suggests that loss firms with good prospects have incentives to signal their future performance using dividend payouts, and R&D is an important factor in determining dividend payout for loss firms.

Pengaruh Retun on Asset, Asset Growth, dan Debt to Equity Ratio terhadap Dividend Payout Ratio

Abstract. The average development of Dividend Payout Ratio in several Manufacturing Sector Companies in Indonesia Stock Exchange period 2012-2016 shows fluctuation. There are several factors related to dividend payout policy such as profit rate, asset expansion rate, and funding requirement. This research uses financial report of 6 (six) manufacturing companies listed in Indonesia Stock Exchange in period 2012-2016 by using comparative descriptive method with quantitative approach and using panel data. The results showed that the Return On Asset and Debt to Equity Ratio partially affect the Dividend Payout Ratio while Asset Growth does not partially affect the Dividend Payout Ratio in the manufacturing sector companies listed on the Indonesia Stock Exchange period 2012-2016. And Return On Asset, Asset Growth, and Debt to Equity Ratio effect simultaneously to Dividend Payout Ratio at manufacturing sector companies listed on Indonesia Stock Exchange period 2012-2016.
 Keywords: Dividend Payout Ratio, Return on Asset, Asset Growth, Debt to Equity Ratio
 Abstrak. Perkembangan rata-rata Dividend Payout Ratio pada beberapa Perusahaan Sektor Manufaktur di Bursa Efek Indonesia periode 2012-2016 menunjukan flukuatif. Terdapat beberapa faktor yang berkaitan dengan kebijakan pembayaran dividen diantaranya tingkat laba, tingkat ekspansi aktiva, dan kebutuhan dana perusahaan. Penelitian ini menggunakan data laporan keuangan 6 (enam) perusahaan sektor manufaktur yang terdaftar di Bursa Efek Indonesia pada periode 2012-2016 dengan menggunakan metode deskriptif komparatif dengan pendekatan kuantitatif dan menggunakan data panel. Hasil penelitian menunjukkan bahwa Return On Asset dan Debt to Equity Ratio berpengaruh secara parsial terhadap Dividend Payout Ratio sedangkan Asset Growth tidak berpengaruh secara parsial terhadap Dividend Payout Ratio pada perusahaan sektor manufaktur yang terdaftar di Bursa Efek Indonesia periode 2012-2016. Dan Return On Asset, Asset Growth, dan Debt to Equity Ratio berpengaruh secara simultan terhadap Dividend Payout Ratio pada perusahaan sektor manufaktur yang terdaftar di Bursa Efek Indonesia periode 2012-2016.
 Kata Kunci: Dividend Payout Ratio, Return on Asset, Asset Growth, Debt to Equity Ratio

The effect of information shocks on dividend payout and dividend value relevance

We exploit the mandatory adoption of International Financial Reporting Standards (IFRS) as a source of exogenous shock to the corporate financial information environment to study the potential effect that this information shock might have on the dividend payout policy and dividend value relevance in the UK and France. We employ a difference-in-differences research design, in which our choice of the control and treatment groups is mainly based on the divergence between domestic accounting standards and IFRS, while holding institutional factors constant. The UK domestic accounting standards slightly diverge from IFRS (low-divergence firms), whereas French domestic accounting standards substantially diverge from IFRS (high-divergence firms). Nevertheless, both countries have similar institutional factors that might confound the effect of IFRS adoption. Our theoretical argument is that IFRS adoption is expected to mitigate information asymmetry, a major reason for the free cash flow problem (Jensen, 1986) and cash over-retention (Myers & Majluf, 1984). Our findings suggest that IFRS adoption is a major contributor in increasing dividend payouts among high-divergence firms via reduction of asymmetric information. Moreover, improving the information environment helps investors become more confident about using accounting numbers to assess firm financial performance, which causes a significant reduction in dividend value relevance among high-divergence firms.