Dividend Policy Of Firms Research Articles

CEO emotional intelligence and firm dividend policy: decision tree analysis

CEO emotional intelligence and firm dividend policy: decision tree analysis

The Effect of Dividend Initiation on Short-run Return in Indonesia: An Event Study with Propensity Score Matching Approach

<p>Dividend initiation policy offers a relatively unique practical and conceptual characteristics compared to those of regular dividend. This study aims at investigating whether initial dividend policy of Indonesian firms affects short-run stock return, while further exploring the implementation of a new event study approach, <em>propensity score matching</em>, as an experimental-like design. This approach is based on actual rather than estimated abnormal return commonly used in traditional approach. Applying this new approach, this study found no significant abnormal returns around dividend initiation announcement by firms listed in Indonesia Stock Exchange. The findings imply that the dividend initiation behavior of Indonesian firms is proved not fully to follow the theoretical framework of signaling model, a dividend model which is basically developed primarily based on regular dividend behavior. The results partly contradict those findings mostly resulted from researchs conducted in advanced market context but seem to support contextuality argument of dividend policy. From methodological perspective, this study identified that the use of propensity score matching approach needs a large number of firms from which control firms are selected, accordingly the study conducted in market with limited number of listed firms such as in Indonesia could generates selection problem of control firms that optimally match treated firms.</p>

Uncertainty and firm dividend policy—A natural experiment

We examine how firms respond to uncertainty around U.S. tax policy changes, namely the individual level tax rate increases set to take effect on January 1, 2011 and January 1, 2013. We provide evidence that firms time the uncertainty in the tax environment and revise their dividend policy to an expected tax increase. We find that firms are likely to initiate their dividends or intensively increase their existing dividend amount one year before the expected tax increase. In addition, in 2012 when there is much less uncertainty on dividend tax changes than in 2010, firms are less likely to initiate a regular dividend but are more likely to initiate special dividends. The results suggest that firms facing less tax uncertainty are less likely to make long-term commitments on regular dividend payments but are more likely to take advantage of the last-minute low tax benefits by issuing special dividends. Furthermore, the response to the possible elimination of a tax cut was strongest in firms with high levels of tax-affected ownership, supporting the argument that when facing policy uncertainty, firms behave to prepare for the worst scenarios from the viewpoint of the shareholders, which in this case is a tax increase.

Dividend policy following mergers and acquisitions: US evidence

Purpose The purpose of this paper is to address whether the past dividend policy of target firm impacts dividend policies following US mergers and acquisitions (M&A). Design/methodology/approach The authors use the catering theory as a theoretical approach to test dividend change after a merger-acquisition. For the empirical design, dividend policy is captured using dividend status, payout ratio and dividend yield, and specifications are estimated using Probit and OLS models. Findings The data indicate that dividend policy of the target affects dividend policy of the combined entity in cases of stock-based deals. This result provides support for catering theory, which maintains that managers of acquirers adjust dividend policies following transactions to cater to target shareholders’ preferences. Research limitations/implications Although the tests suggest significant results using dividend status and payout ratio as measures of dividend, the authors do not find a similar effect for dividend yield. Practical implications Financial analysts evaluating merger-acquisition announcements may wish to predict the dividend policy following stock-based deals as they project the likely impact of past dividend policies of target firms. The results are also likely to be useful to investors. Originality/value The paper presents new evidence about dividend policy following M&A. To the authors’ knowledge, this is the first study that examines how an acquirer’s dividend policy is affected by an acquisition.

주식유동성이 배당정책에 미치는 효과

주식유동성이 배당정책에 미치는 효과

Dividend policy and the catering theory: evidence from the Taiwan Stock Exchange

Purpose The purpose of this paper is to examine the dividend policy for firms listed on the Taiwan Stock Exchange. The results are consistent with the prediction of the catering theory in that managers choose a dividend policy to cater to the demand of investors. Design/methodology/approach Logistic regressions are used to test the catering theory hypothesis. Findings The results find that the firms distribute more stock dividends than other types of dividends when the dividend premium (DP) for stock dividends is positive. In contrast, firms shift from stock dividends to other types of dividends such as mixed dividends and cash dividends when the DP for stock dividends is negative. Originality/value The marginal contribution of this paper is that the firms change their dividend policy via DP to cater to the demand of investors.

The market for corporate control and dividend policies: Cross-country evidence from M&A laws

This article examines the association between the market for corporate control and firm dividend policies. Specifically, we examine changes in firms’ dividend payouts following a plausibly exogenous shock to the threat of takeover with the staggered initiation of country-level merger and acquisition (M&A) laws. Using a global sample of firms across 34 countries, we find that both the likelihood and the amount of dividends decrease significantly after the initiation of an M&A law in a country. Our cross-sectional analyses indicate that the negative effect of M&A laws on dividend payouts is amplified in countries where the institutional environment enables M&A laws to improve the takeover market and for firms that could readily use internal capital to finance growth opportunities. Moreover, this negative effect is attenuated for firms with already sufficient monitoring of managers. These findings suggest that the enactment of M&A laws, by strengthening the market for corporate control, lowered the need for firms to convey their commitment to shareholders’ interests through costly dividend payments, especially when the threat of takeover prompted by M&A laws is likely to serve as an effective disciplinary mechanism.

Agency Problems, Product Market Competition and Dividend Policies inPakistan

The present study investigates the influence of product market competition on the dividend policies of the listed companies at KSE 100 index in Pakistan. It identify whether product market competition mitigates agency problems between controlling shareholders and minority shareholders. In particular, we examine firm dividend policies in competitive market, the study use three statistical measures for the analysis of 30 textile firms. The result shows that the product market competition have no significant impact on dividend policies of Pakistan. This study recommends that the product market competition can be an effective tool that can force the managers to give cash to shareholders.

THE INFLUENCE OF CAPITAL STRUCTURE AND FIRM SIZE ON PROFITABILITY AND DIVIDEND POLICY (An Empirical Study at Property and Real Estate Sector Listed in Indonesia Stock Exchange during the periods of 2009-2012)

Penelitian ini dilakukan untuk meningkatkan pengetahuan tentang struktur modal, ukuran perusahaan, profitabilitas, dan kebijakan dividen. Penelitian ini dilakukan di sektor real estate yang terdaftar di Bursa Efek Indonesia (BEI) properti dan selama periode 2009-2012. Data dikumpulkan dari 36 laporan keuangan tahunan menggunakan purposive sampling. Hasil penelitian menunjukkan bahwa Struktur Modal memiliki pengaruh signifikan negatif terhadap Profitabilitas dan Ukuran Perusahaan memiliki pengaruh signifikan positif tetapi tidak pada Profitabilitas. Selain itu, Struktur Modal tinggi atau lebih rendah tidak mempengaruhi Kebijakan Dividen. Penelitian ini juga menunjukkan bahwa Firm Size signifikan positif mempengaruhi Kebijakan Dividen. Terakhir, Profitabilitas memiliki hubungan yang positif dan signifikan terhadap Kebijakan Dividen perusahaan properti dan real estate yang terdaftar di BEI. Penelitian ini bertujuan untuk memberikan saran yang baik untuk perusahaan manajemen dan investor di Indonesia, bahkan lebih untuk berkontribusi pada pengembangan penelitian keuangan, terutama di Struktur Modal, Ukuran Perusahaan, Profitabilitas, dan Kebijakan Dividen. Kata kunci: Struktur Modal, Ukuran Perusahaan, Profitabilitas, Kebijakan Dividen ABSTRACT The study conducted to enhance the knowledge about capital structure, firm size, profitability, and dividend policy. The study conducted at property and real estate sector listed in Indonesia Stock Exchange (IDX) during the periods of 2009-2012. Data were collected from 36 annual financial statements using purposive sampling. The result shows that Capital Structure has a negative significant influence on Profitability and Firm Size has positive but not significant influence on Profitability. Besides, higher or lower Capital Structure has no influence on Dividend Policy. The study also shows that Firm Size is significant positively influence Dividend Policy. Lastly, Profitability has a positive and significant relationship to Dividend Policy of property and real estate companies listed on IDX. The study is aim to provide a good suggestion for the management company and investor in Indonesia, even more to contribute to the finance research development, especially in Capital Structure, Firm Size, Profitability, and Dividend Policy. Keywords: Capital Structure, Firm Size, Profitability, Dividend Policy

A Study on Foreign Investors’ Influence on Dividend Policy of e-Business Firms in KOSDAQ Market

A Study on Foreign Investors’ Influence on Dividend Policy of e-Business Firms in KOSDAQ Market

Corporate Governance Practices and Dividend Policies of Quoted Firms in Nigeria

This paper aims to determine the impact of corporate governance of quoted Nigerian firms on the dividend policy of these firms. Sectoral analysis of the dividend payout ratios of 57 quoted firms from13 sectors on the Nigerian stock exchange reveal that Nigerian firms adopt the dividend payout ratios of the industry leader and others the industry average. An impact analysis of corporate governance of these quoted firms on their dividend policies measured by their payout ratios using chi-square shows that corporate governance has no impact on the dividend policies of Nigerian firms as it does in developed economies because in Nigerian firms, shareholder rights are low, firms are controlled by numerical minority director-shareholders who make decisions affecting numerical majority shareholders, agency cost effect of dividend decisions is non-existent as controlling shareholders are also directors, and the rate dividend payout of these firms is an indication of the existence of expropriation of funds by director-shareholders. To redress this situation in Nigerian quoted firms, shares of closely held firms should not be traded on the exchange, maximum shareholding by an individual be the maximum 25%; capital market and firm regulators should verify the accuracy of disclosures to ensure they are not only made to comply with regulations but to instill good corporate governance practices in Nigerian firms.

INVESTOR CONFIDENCE, CORPORATE GOVERNANCE, STOCK LIQUIDITY AND DIVIDEND POLICY

Purpose: The objective of this study is to examine the impact of investor confidence, corporate governance and stock liquidity on dividend policy of firms listed on Pakistan stock exchanges from 2010-2015. The liquidity constraint enabled a superior association with the interests of the controlling shareholders, particularly outside investors, which make a significant enhancement in firms’ liquidity and governance. Findings: Our results indicate that dividends have a less significant impact on investor confidence after the corporate governance. Practical Implication: Our interpretation is that the improvement in corporate governance, especially the improvement in the alignment between growth opportunities and cash dividends, may take longer time to emerge. These findings provide strong evidence that shift in corporate governance and stock liquidity influence dividend policy of a firm in a substantial manner. Another implication is that stock liquidity matters in firms’ dividend decision-making; the liquidity deficiency is compensated by large cash dividends.

Interindustry dividend policy determinants in the context of an emerging market

This article examines the determinants of the dividend policies of public listed firms in Malaysia for the period 2005 to 2009. A panel regression estimation model is used to identify the determinants of dividend policy within Malaysian firms. These determinants are then examined across eight different industries – Technology, Industrial, Consumer Noncyclical, Basic Material, Communication, Consumer Cyclical, Diversified and Energy – to investigate possible divergences in the determinants of dividend payouts in the context of an emerging market. Empirical findings show that firm size, leverage position, and profitability are significantly and inversely related to the dividend policy of firms in Malaysia. However, the industry-specific determinants of dividend policy display a number of variances that could plausibly be used as an indication of the selection of stocks in specific industries by potential investors. The results indicate that agency cost is positively related to dividend policy for the Basic Material industry. In addition, size and leverage play an important role in determining dividend payout for firms in the Technology and Consumer Noncyclical industries. For the Industrial sector, the size and profitability significantly affect the dividend policy of firms. However, the results failed to display any significant results for the Energy and Consumer Cyclical industries.

Determinants of dividend policy in GCC firms: an application of partial least square method

This study focuses on providing empirical evidence on explanation of alternate dividend theories and determinants of payout policies by examining the GCC market. The study explores the financial determinants of the dividend payout policies by examining 646 dividend intensive firms of the GCC. The results suggest that large firms in GCC tends to have larger retained cash flows and tend to have higher dividend intensity. It can be implied that GCC based firms adopt a balanced and cautious approach regarding future growth opportunities as well as the dividend payout policy. Higher the liquidity and profitability signals higher dividend intensity. GCC firms which are liquid and profitable tend to pay more dividends. GCC firms with higher market valuation tend to pay more dividends. Firms with high growth rates of earnings and assets tend to pay less dividends. Firms with high leverage are riskier and risky firms tend to pay less dividends.

Market power and dividend policy: Evidence from firms listed in Tehran stock exchange

Dividend policy informs shareholders and investors how the financial situation of the firm is. Therefore, in situations where risk is always the determining factor for dividend policy, the company with the market power, can affect major changes in social, economic, and political events or have more successful responds toward them, and thus, is less exposed to systematic risk. Therefore, market power helps the firm to preserve firm-specific shocks from its product market or to reduce the information uncertainty that the investors of the firm face it. Hence, this study attempts to investigate the impact of product market pricing power on the firm's dividend policy. For this purpose, the data from 122 firms listed in Tehran Stock Exchange during 2009 to 2013 and Panel data model were used. The results showed that there is a reveres significant relationship between firm’s market power and the amount of dividend policy of listed firms in Tehran Stock Exchange.

Determinants of Dividend Policy: A Panel Data Analysis for Turkish Listed Firms

<p>Dividend policy of firms is one of the most controversial issues of theoretical finance. This paper aims to investigate the firm-level factors influencing the dividend decisions of firms from an emerging market. We examined eight-year panel data for the period from 2006 to 2013 from the Turkish stock market (Borsa Istanbul). The results show that financial leverage, size, growth rate, age, profitability, ownership structure and P/E ratio are statistically significant. The relationship of leverage, growth rate, profitability and family control with dividends is negative, whereas the relationship of size, age and P/E ratio is positive. Therefore, firms with higher debt ratios / growth rates / higher earnings are likely to retain more of their earnings. The empirical evidence from the Turkish stock market shows that the maturity hypothesis proposed by Grullon, Michaely and Swaminathan (2002) best explains the dividend behaviors of firms. Accordingly, as a firm matures, the availability of profitable projects reduces and earnings decrease. As the investment opportunities reduce, the need for resources decreases and the firm increases dividend payouts to shareholders.</p>

Dividend Policy of Jordanian Firms: Stability Tests and Survey Results

The aim of this study is to examine listed Jordanian firms in terms of the issue of dividend policy stability. In more specific terms, the paper complements the econometric analysis of dividend stability with a survey of the Chief Financial officers (CFOs). Based on a total of 40 industrial firms and the time period 2002-2013, the results of the panel data analysis indicate that Jordanian firms follow stable dividend policy. In addition, the survey results support the econometric conclusions. Based on the results of this paper, it is recommended that future research should examine the issue of what really determines the dividend policy of Jordanian firms. In addition, given the fact that the industrial firms follow stable dividend policy, it would be extremely interesting to investigate whether or not these firms manage earnings in order to meet their dividend stability objective. Highlights: Examining listed Jordanian industrial firms in terms of if the firms adopt stable dividend policy?The results reveal that the sample of firms do follow stable dividend policy Do Chief Financial officers’ (CFOs) views on dividend policy support or contradict the actual behaviour of dividend policy?

DIVIDEND POLICY IN REGULATED NETWORK INDUSTRIES: EVIDENCE FROM THE EU

We study the dividend policy of firms in regulated network industries, focusing on the impact of different regulatory regimes and government control. We link payout and smoothing decisions to different regulatory mechanisms (cost‐based vs. incentive regulation) and state versus private ownership. We test our predictions on a panel of listed European electric utilities, accounting for potential endogeneity of the choice of regulatory and ownership patterns. We find that incentive‐regulated firms smooth their dividends less than cost‐based regulated firms and that they report higher target payout ratios. Consistent with the interest group theory of regulation, we find that incentive regulation schemes are less likely when the state is still an important shareholder in the sector. Additionally, our results show that government control undermines the efficiency‐enhancing effects of incentive regulation on dividend policy, for example, lower smoothing is only due to private firms. (JEL G35, L51, L32, L9)

Dividend Policy, Ownership Structure and Corporate Governance: An Empirical Analysis of Indian Firms

In this article, we investigate the possible association between the firm's ownership structure and dividend policy and whether the corporate governance (CG) practices adopted by the firm have any impact on dividend policy. In India the presence of family-run firms, with concentrated ownership, is a reality and we try to understand whether such firms have any significantly different approach to dividend policy compared to non-family-run companies.The use of debt by firms in their capital structure acts as an additional monitoring mechanism and we propose to analyse whether this has any impact on dividend policy.We explore the determinants of dividend policy of Indian firms. Thus, firm characteristics which seem to have an impact on dividend policy, like profitability, liquidity, growth, income volatility, size and age are investigated. We use a panel of 51 top Indian listed firms, in terms of market capitalisation (BSE 100 and NIFTY 100), over the 5-year period from 2007–2008 to 2011–2012 for our analysis.We conclude that the CG variables, namely, board size, independent directors and the proportion of non-executive directors on the board have significant impact on the dividend policy of the firm.The proportion of cash and cash equivalent to total asset, used as a measure of firm liquidity, also has an influence on the dividend policy. Growth opportunities have a positive influence on the dividend policy of firms.

Corporate governance and financial policies

Purpose – The purpose of this paper is to examine the influence of board structure on dividend policy of Australian corporate firms. It also considers the traditional explanations of corporate dividend choice, such as agency cost theory, signalling hypothesis, the life cycle hypothesis along with tax-based explanations of dividend policy. Design/methodology/approach – The final sample consists of 413 non-financial firms that are part of the All Ordinaries Index. The causal analysis was undertaken in three stages. In the first stage, the authors analyse the likelihood of paying dividends. And classify all firms as either dividend payers or non-payers. The authors then model this binary variable as a function of different sets of variables. In the second stage, the authors analyse the factors determining the magnitude of dividend payout by those firms that have paid a dividend. In contrast, stage three employs all firms – those which did not pay any dividend and those firms which paid a dividend. Findings – For the study period 2004-2009, this study finds that board independence has a significant positive influence on the dividend payout of Australian firms. This finding is consistent with the “outcome” model of La Porta et al. (2000). This study also finds that size has a significant positive influence on the dividend payout of Australian firms thus providing support for the agency cost view of dividend policy. Similarly, this study also finds support for the signalling hypothesis and the life cycle theory given the significant positive influence of profitability and the significant negative influence of current losses and growth opportunities on the dividend policy of Australian firms. Research limitations/implications – The findings of the study are robust with to alternative measures of variables employed and are not influenced by the global financial crisis. However, this study did not consider the possible endogenous and multiple relationships between dividends, debt, profitability, cash holdings and governance structures given the limited study period considered. Practical implications – This study finds that board independence has a significant positive influence on the dividend behaviour of Australian firms. This suggests that dividends and independent directors play complementary governance roles. While dividends provide the monitoring and disciplinary roles, independent directors act as catalysts for enhancing effective board functioning. These findings have implications for corporate governance policies and the payout policies. Originality/value – Though the governance role of dividends has long been recognized in the literature (Easterbrook, 1984; Jensen, 1986), very few studies analyse the influence of board characteristics on the decision to pay dividends in Australia. Given the distinct Australian setting where the tax imputation system allows companies to pay franked dividends to domestic investors, this study provides evidence on the interaction of corporate and dividend policies. This study finds that dividend polices are influenced by percentage franking of dividends. This study also finds that board independence has a significant positive influence on the dividend policy of Australian firms.