Dividend Strategy Research Articles

How Might Model Uncertainty and Transaction Costs Impact Retained Earning & Dividend Strategies? An Examination Through a Classical Insurance Risk Model

How Might Model Uncertainty and Transaction Costs Impact Retained Earning & Dividend Strategies? An Examination Through a Classical Insurance Risk Model

Periodic threshold-type dividends for a perturbed dual risk model with a random time horizon

In this paper, we investigate the dividend problem where the surplus process is inscribed by a perturbed dual risk model with a random time horizon, where a periodic threshold-type dividend strategy is applied to the surplus process. Under such a dividend strategy, if the surplus level is bigger than the maximum of threshold b and the last observed level (post-dividend) at dividend-decision times, then a fraction of the excess is paid off as a lump sum dividend. In addition, we assume that ruin can only occur at dividend-decision times. When the individual gains density has a rational Laplace transform, explicit expressions for the expected value of the present dividends before ruin are provided. Finally, numerical examples are presented to explore the effect of the parameters in the model on the dividend function.

Optimal dividend policy with self-exciting claims in the Gamma–Omega model

In this paper, we consider the optimal dividend policy for an insurance company under a contagious insurance market, where the occurrence of a claim can trigger sequent claims. This clustering effect is modelled by a self-exciting Hawkes process where the intensity of claims depends on its historical path. In addition, we include the concept of bankruptcy to allow the insurance company to operate with a temporary negative surplus. The objective of the management is to obtain the optimal dividend strategy that maximises the expected discounted dividend payments until bankruptcy. The Hamilton–Jacobi–Bellman variational inequalities (HJBVIs) are derived rigorously. When claim sizes follow exponential distributions and the bankruptcy rate is a positive constant, the value function can be obtained based on the Gerber–Shiu penalty function and the optimal dividend barrier can be solved numerically. Finally, numerical examples are demonstrated to show the impact of key parameters on the optimal dividend strategy.

Computing two actuarial quantities under multilayer dividend strategy with a constant interest rate: Based on Sinc methods

As risk processes with some kind of dividend strategies receive remarkable attention in the financial market, the analysis of risk quantities in the presence of interest (or return) has become an important issue in insurance risk theory, and the corresponding research should be of concern to actuaries. In this paper, we study a perturbed dual risk model with a constant interest rate and a multilayer threshold strategy. We derive respectively the integral differential equations satisfied by the expected present value of the total dividend until ruin and the Laplace transform at the time of ruin. By applying the Sinc method developed in this paper, we derive the approximate solutions of the integral differential equations satisfied by these two risk quantities. Finally, various numerical examples are provided to demonstrate the feasibility of the Sinc method.

Dilemma of the investment strategy: dividend cut-offs (retrospective analysis)

The author considers the results of a statistical analysis of changes in stock prices for 10 largest Russian companies in various industries over 12 years in connection with dividend payments. Statistical patterns of stock price behavior before and after the dividend cut-offs are revealed, which allows investors to build their dividend strategies and answer the “eternal” question of question of whether to sell or to buy shares before the dividend cut-off. A retrospective statistical analysis is carried out on 120 dividend payments.

Strategi Dividen yang Efektif: Memahami Keseimbangan antara Kondisi Keuangan dan Peluang Investasi untuk Pertumbuhan Laba Perusahaan

In complex business dynamics, dividend policy strategy is a key element that influences company growth and competitiveness. An effective balance between financial conditions and investment opportunities is the main focus to achieve sustainable profit growth. This research aims to understand effective dividend strategies by exploring the optimal balance between a company's financial condition and investment opportunities as a critical step towards sustainable profit growth. The type of research used is associative quantitative. The data used is secondary data obtained from the Indonesian Stock Exchange for the research period. Sample selection was carried out based on the purposive sampling method. This research reveals that an effective dividend strategy requires a deep understanding of the balance between finance and investment. A dividend policy that is appropriate to financial conditions and supports investment opportunities can make a positive contribution to company profit growth.

Based on Symmetric Jump Risk Market: Study on the Ruin Problem of a Risk Model with Liquid Reserves and Proportional Investment

In order to deal with complex risk scenarios involving claims, uncertainty, and investments, we consider the ruin problems in a compound Poisson risk model with liquid reserves and proportional investments and study the expected discounted penalty function under threshold dividend strategies. Firstly, the integral differential equation of the expected discounted penalty function is derived. Secondly, since the closed-form solution of the equation cannot be obtained, a sinc method is used to obtain the numerical approximation solution of the equation. Finally, the feasibility and superiority of the sinc method are illustrated by error analysis. In addition, based on a symmetric jump risk market, we discuss the influence of some parameters on the ruin probability with some examples. This study can help actuaries develop more robust risk management strategies and ensure the long-term stability and profitability of insurance companies. It provides a theoretical basis for actuaries to carry out risk management.

DIVIDEND POLICIES OF COMPANIES

The study on "Dividend Policies of Companies" delves into the intricate decisions and strategies that companies employ in distributing profits to their shareholders. Dividend policy is a crucial aspect of corporate finance that has significant implications for both investors and the overall financial health of a company. This research aims to provide a comprehensive understanding of the various factors influencing dividend policies, the diverse approaches adopted by companies across different industries, and the implications of these decisions on shareholder value. The research methodology encompasses a systematic review of existing literature, financial reports, and case studies to analyze the historical trends and current practices in dividend distribution. Key factors influencing dividend policies, such as profitability, cash flow, growth prospects, and industry dynamics, will be examined to uncover the underlying rationale guiding companies in formulating their dividend strategies. Furthermore, the study explores the impact of macroeconomic variables, regulatory frameworks, and market conditions on shaping dividend policies. Additionally, it investigates the relationship between dividend policies and a company's stock performance, investor perceptions, and overall market dynamics. The findings of this research aim to contribute valuable insights for investors, financial analysts, and corporate decision-makers, aiding them in making informed decisions regarding investment strategies, risk management, and capital allocation. Ultimately, a deeper understanding of dividend policies can enhance the efficiency of financial markets and contribute to the overall stability and sustainability of corporate entities. KEYWORDS Dividend Policies ,Corporate Finance,Shareholder Value ,Profit Distribution,Financial Health,Investment Strategies,Cash Flow Management,Growth Prospects

Numerical method for a compound Poisson risk model with liquid reserves and proportional investment

<abstract><p>In this paper, a classical risk model with liquid reserves and proportional investment is considered, and the expected total discounted dividend before ruin of insurance companies under the threshold dividend strategy is studied. First, the integral differential equations of the expected total discounted dividend before ruin satisfying certain boundary conditions is derived. Second, since the explicit solutions of the equations cannot be obtained, the numerical approximation solutions are obtained by the sinc approximation method. Finally, we discuss the effects of parameters such as risk capital ratio and liquid reserve on the expected total discounted dividend before ruin by some examples.</p></abstract>

On the Expected Discounted Penalty Function Using Physics-Informed Neural Network

We study the expected discounted penalty at ruin under a stochastic discount rate for the compound Poisson risk model with a threshold dividend strategy. The discount rate is modeled by a Poisson process and a standard Brownian motion. By applying the differentiation method and total expectation formula, we obtain an integrodifferential equation for the expected discounted penalty function. From this integrodifferential equation, a renewal equation and an asymptotic formula satisfied by the expected discounted penalty function are derived. In order to solve the integrodifferential equation, we use a physics-informed neural network (PINN) for the first time in risk theory and obtain the numerical solutions of the expected discounted penalty function in some special cases of the penalty at ruin.

Quantitative Analysis and Comparative Review of Dividend Policy Dynamics within the Banking Sector: Insights from Global and U.S. Financial Data and Existing Literature

This paper presents a comparative review of academic research on dividend policies and payments within the banking sector. Dividends represent a critical area of focus due to their implications for bank capital levels, profitability, regulatory compliance, and investor signaling. The literature reviewed spans pre- and post-2008 financial crisis periods and adopts both global and emerging market perspectives. Methodologies include regression analyses, causality tests, descriptive statistics, and financial ratio computations based on regulatory filings, financial statements, and market data datasets. Key findings demonstrate the multifaceted nature of bank dividend strategies, differences across countries, shifts during crises, and complex interplays with financial health metrics. The studies find evidence that dividends provide valuable signals to investors on earnings prospects, aligning with signaling theories. However, interpreting crisis-induced behaviors warrants caution due to short-term deviations. Opportunities exist for further analysis of cross-country variances, crisis responses, and linkages to bank stability. This comparative review enhances academic comprehension of bank dividend policies' motivations, outcomes, and determinants. It highlights the need for judicious balancing of stakeholder demands for returns and growth, an increasingly crucial endeavor amidst global uncertainty.

Navigating the Interplay of Profitability, Debt Policy, and Dividend Strategy in Business Valuation

Dividend policy is often considered a good signal for investors in assessing the good and bad of the company, the increase and decrease of the Dividend Policy contains information on the current state of company management and the state of profits in the future. This study was conducted to determine and analyze the Effect of Profitability and Debt Policy on Company Value with Dividend Policy as an Intervening Variable. This study was conducted using associative quantitative methods. The number of samples in this study based on criteria was obtained as many as 112 data from 16 companies for 7 periods with the Eviews 11 testing tool. The analysis techniques used are descriptive statistical analysis, panel data regression testing, classical assumption testing, and path analysis. Next, hypothesis testing using f test, t test and coefficient of determination assisted by using Eviews 11 program. The results showed simultaneous tests that profitability, debt policy and dividend policy had a significant effect on the value of the company. The results of the track test show that dividend policy is able to mediate the relationship between profitability and debt policy to company value.

Equilibrium dividend strategies in the dual model with a random time horizon

Equilibrium dividend strategies in the dual model with a random time horizon

Optimal periodic dividends with penalty payments under a diffusion model

In this work, we examine the optimal periodic dividend problem with penalty payments for a diffusion model, where dividends are only paid at Poisson arrival times. Moreover, we assume that (observed) ruin or bankruptcy does not occur even if the surplus is negative, but the penalty payments happen. The goal is to seek an optimal periodic dividend strategy to maximize the expectation of the difference between the present value of dividends and penalty payments. We demonstrate that the optimal strategy is a periodic barrier strategy. For the exponential penalty function, the optimal periodic barrier and the explicit expression for the value function are determined. Several numerical instances are also presented.

Optimal risk sharing and dividend strategies under default contagion: A semi-analytical approach

We investigate the risk control and dividend optimization problem of an insurance group in a general setting and propose an innovative semi-analytical approach to the problem. The group consists of multiple subsidiaries and is subject to exogenous default risk. The default intensity is subject to the contagious effect. The contagious effect refers to the increase in default intensities of surviving subsidiaries within the group when a default event occurs. The recursive system of Hamilton-Jacobi-Bellman variational inequalities (HJBVIs) is derived together with the verification theorem. We propose a semi-analytical approach that first finds the analytical solution in the continuation region and then the numerical solution in the risk exposure region. We further present a numerical example of a three-subsidiary insurance group to demonstrate the semi-analytical method and illustrate the recursive computation procedures that are extendible to cases with more subsidiaries.

Stable dividends under linear-quadratic optimisation

The optimisation criterion for dividends from a risky business is most often formalised in terms of the expected present value of future dividends. That criterion disregards a potential, explicit demand for the stability of dividends. In particular, within actuarial risk theory, the maximisation of future dividends has been studied as the so-called de Finetti problem. However, there the optimal strategies typically become so-called barrier strategies. These are far from stable, and suboptimal affine dividend strategies have recently received attention. In contrast, in the class of linear-quadratic problems, the demand for stability is explicitly stressed. These have often been studied in diffusion models different from the actuarial risk models. We bridge the gap between these thinking patterns by deriving optimal affine dividend strategies under a linear-quadratic criterion for an additive process. We characterise the value function by the Hamilton-Jacobi-Bellman equation, solve it, and compare the objective and the optimal controls to the classical objective of maximising the expected present value of future dividends. Thereby we provide a framework within which stability of dividends from a risky business, e.g. in classical risk theory, is explicitly demanded and obtained.

A Semi-Markov Dynamic Capital Injection Problem for Distressed Banks

Our study investigates the optimal dividend strategy for a bank, taking into account the potential for government capital injections. We explore different types of government interventions, such as liberal, transparent, or uncertain strategies, and consider both single and multiple types of interventions. Our approach differs from others as it focuses on interventions that aim to maintain the overall stability of the financial system, rather than just addressing banks that have already sought government assistance or are in dire need of it. Specifically, we focus on situations where the government is more likely to assist banks that have not requested its intervention or that are not too difficult to save. To accomplish this, we conduct a comprehensive examination of all possible scenarios involving a single, one-time capital injection and derive explicit solutions for the associated optimal control problem. Furthermore, we expand the model to include semi-Markov dynamic capital injection processes and show that the optimal control is the unique viscosity solution of a Hamilton–Jacobi–Bellman equation. The government’s strategy also takes into account the bank’s solvency and any past government interventions.

On the optimality of the refraction–reflection strategies for Lévy processes

In this paper, we study de Finetti’s optimal dividend problem with capital injection under the assumption that the dividend strategies are absolutely continuous. In many previous studies, the process before being controlled was assumed to be a spectrally one-sided Lévy process, however in this paper we use a Lévy process that may have both positive and negative jumps. In the main theorem, we show that a refraction–reflection strategy is an optimal strategy. We also mention the existence and uniqueness of solutions of the stochastic differential equations that define refracted Lévy processes.

Optimal Investment in a Dual Risk Model

Dual risk models are popular for modeling a venture capital or high-tech company, for which the running cost is deterministic and the profits arrive stochastically over time. Most of the existing literature on dual risk models concentrates on the optimal dividend strategies. In this paper, we propose to study the optimal investment strategy on research and development for the dual risk models to minimize the ruin probability of the underlying company. We will also study the optimization problem when, in addition, the investment in a risky asset is allowed.

Time-inconsistent view on a dividend problem with penalty

We consider the dividend maximization problem including a ruin penalty in a diffusion environment. The additional penalty term is motivated by a constraint on dividend strategies. Intentionally, we use different discount rates for the dividends and the penalty, which causes time-inconsistency. This allows to study different types of constraints. For the diffusion approximation of the classical surplus process we derive an explicit equilibrium dividend strategy and the associated value function. Inspired by duality arguments, we can identify a particular equilibrium strategy such that for a given initial surplus the imposed constraint is fulfilled. Furthermore, we illustrate our findings with a numerical example.