Cash Dividend Payments Research Articles

Determinants of Dividend Policy: Evidence from Polish Listed Companies

Abstract Dividend policy has been still a controversial issue in corporate finance. The question, when and why do firms pay dividends, is still valid. Vast literature has examined the dividend policies of firms from developed countries, especially from U.S. Relatively little research has yet been published examining the dividend policies of companies from emerging countries. The main goal of this paper is to examine cash dividend payments of Polish listed companies. In this study, panel data analysis is applied to investigate the determinants of dividend policies of Polish companies. The paper also explains the impact of different factors on dividend policy on Polish market.Moreover, it tries to examine whether the same factors (profitability, liquidity, size, leverage of the firm) affect dividend payout decisions on Polish market as on developed countries.

Impact of Firm Specific Factors on Cash Dividend Payment Decisions: Evidence from Bangladesh

This study aims to explore the impact of firm specific factors on cash dividend payment decisions for a sample of 41 non financial firms listed in Dhaka Stock Exchange (DSE) in Bangladesh during 2007-2011. This study tests a null hypothesis that none of the firm specific factors namely profitability, size, liquidity, growth, earnings volatility, and managerial ownership has significant effects on cash dividend payments using fixed-effect regression model under the assumption that intercepts vary for each firm and the slope coefficients are constant across firms. Checking multicollinearity, cross-sectional dependence, autocorrelation and controlling heteroskedasticity in the regression analysis it is found that profitability has statistically significant positive effects on cash dividend payments. This study has discovered a significant negative effect of earnings volatility and managerial ownership on dividend payments which were unfolded before this study. On the other hand, size, growth and liquidity were not found to be significant explanatory variables of dividend payments. Thus, profitability, earnings volatility and managerial ownership are functioning as the key determinants of cash dividend payments in Bangladesh.

Information content of dividends: a case of an emerging financial market

Purpose– The purpose of this paper is to examine the signaling and free cash flow hypotheses of dividends in the context of an emerging financial market.Design/methodology/approach– The authors use fundamental financial information of Chinese companies listed in the Shenzhen and Shanghai stock exchanges. They examine the impact of cash dividend payments on future profitability of individual firms with and without controlling for non-linearity in their earnings to test the signaling hypothesis. They also determine the characteristics of dividend paying firms to examine the free cash flow hypothesis.Findings– It was found that while dividend increases by publicly listed Chinese firms are followed by increases in earnings in two subsequent years, such relationship does not exist in the case of dividend decreases. However, under the assumption of non-linearity of earnings, it was found that neither dividend increases nor dividend decreases convey any valuable information about future changes in earnings of Chinese firms. Further, it was found that firms with high cash holdings, large profitability and high managerial efficiency are likely to pay dividends. The authors therefore conclude that announcements of cash dividend payments do not signal future performance but indicate good governance practices of publicly traded firms in China.Originality/value– This evidence is critical for potential foreign investors in their portfolio investment decisions and for regulators in determining an efficient measure of corporate disclosure in China.

PENGARUH PROFITABILITAS, ARUS KAS OPERASI, DAN ARUS KAS BEBAS TERHADAP DIVIDEN KAS PADA PERUSAHAAN MANUFAKTUR TERDAFTAR DI BURSA EFEK INDONESIA PERIODE 2005 - 2009

The purpose of this study is to examine the effect of profitability, operating cash flow, and free cash flow on cash dividend of manufacturing companies listed at the Indonesia Stock Exchange in the period 2005-2009.           The population in this study are 15 listed companies from the manufacturing sector in Indonesia Stock Exchange which have the profitability, positive operating cash flow, positive free cash flow, and pay cash dividends. The time horizon used is a combination of cross-sectional with longitudinal (time series). The study population consists of 15 issuers with 75 observations. This study uses census methods. To examine the influence of profitability, operating cash flow, and free cash flow to cash dividends use multiple linear regression models.           The results show that (1) profitability, operating cash flow, and free cash flow simultaneously influence on the cash dividends on listed companies from the manufacturing sector at the Indonesia Stock Exchange during the 2005-2009 period. (2) Affect the profitability of cash dividends on companies from the manufacturing sector listed at the Indonesia Stock Exchange during the 2005-2009 period. (3) Operating cash flow has influence to cash dividends at companies manufacturing sector listed at the Indonesia Stock Exchange during the 2005-2009 period. (4) Free cash flow have negative influence to the cash dividend at companies manufacturing sector listed at the Indonesia Stock Exchange during the 2005-2009 period. Keywords: Profitability, Operating Cash Flow, Free Cash Flow, Cash Dividends.Â

Hybrid Equity-Interest Rate Model with Stochastic Interest Rate and Volatility

This paper presents an Equity-IR hybrid model that fits in the class of affine diffusion processes. In the absence of cash dividend payment, the moment generating function can be easily and rapidly computed. This allows for an efficient calibration of the model based on Vanilla European Options prices. In practice, cash dividend payments are common and are modeled via the piece-wise and escrowed approaches. We show how to compute Vanilla European Options prices efficiently in this case. The semi-analytical approximation pricing formulas obtained in the piece-wise approach are one of our primary results.In order to assess the semi-analytical pricing method, we compare the computed prices to those obtained via Monte Carlo simulation. Three discretization schemes are used: the two first ones, which have been introduced by Andersen, are the Quadratic Exponential (QE) and its extension with martingale correction QE-M. The last scheme is a new extension of the QE scheme denoted QE-I, that we introduced in order to allow the use of larger simulation time steps by comparison to QE and QE-M.

Do corporate governance mechanisms affect cash dividends? An empirical investigation of UK firms

The study examines whether corporate governance mechanisms and the compliance with good governance practice are related to cash dividends. In particular, the study assesses the effect of institutional ownership and board structure on the decision to pay cash dividends. A study on UK firms is interesting because firms are expected to voluntarily structure governance mechanisms based on their own needs. We find that institutional owners positively affect cash dividend payments, suggesting that UK institutions are effective in forcing firms to disgorge cash. There is limited evidence that independent directors affect the cash dividends. The results also show that firm specifics affect the cash dividends, namely, business risk, firm size, and leverage ratio. The results are consistent across several robustness checks.

Corporate payout policy in dual-class firms

We examine corporate payout policy in dual-class firms. The expropriation hypothesis predicts that dual-class firms pay out less to shareholders because entrenched managers want to maximize the value of assets under control and the associated private benefits. The pre-commitment hypothesis predicts that dual-class firms pay out more to shareholders because firms use corporate payouts as a pre-commitment device to mitigate agency costs. Our results support the pre-commitment hypothesis. Dual-class firms have higher cash dividend payments and total payouts, and they use more regular cash dividends rather than special dividends or repurchases, compared to their propensity-matched single-class firms. Dual-class firms with severe free cash flow-related agency problems and few growth opportunities rely even more on corporate payouts as a pre-commitment mechanism. We also rule out the alternative explanation that dual-class firms pay out more because super-voting shareholders lack the ability to generate home-made dividends by selling shares since super-voting shares are often non-tradable or very illiquid.

Searching for Determinants of Pay or Not to Pay Cash Dividend in Indonesia

Normal 0 false false false EN-US X-NONE X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} A dividend decision of a firm is an outcome of various considerations. These considerations differ across time and industry. Based on asymetric information – agency theory th ougtht , this study re-examined various variables that have a bearing on the dividend decision of a firm. In addition to examining the impact of corporate fundamentals on   dividend policy , the study also analyzed the effect of expropriation trigger variables ( family ownership, cash funds , the level of diversification and Related Party Transaction/RPT ) on a dividend policy . The results of panel logistic regression indicated that C ash F unds, RPT, P rofitability, Size, Growth, Debt and Macroecomics variables are the determinants of the dividend policy for Indonesian listed public companies, observed during 2002 to 2010.   Keywords : dividend policy -pay and not pay cash dividend, expropriation, asymmetry information, agency theory,   family ownership, cash funds, level of diversification, related party transaction, panel data analysis.

Theories on Dividend Policy Empirical Research in Joint Stock Companies in Kosovo

Global experience makes clear the importance of dividend policy as a promoter in large corporations. Corporations are the backbone of the economy as a whole, they are a key source of jobs and certainly the largest taxpayer of an economy. In recent years it appears that most common way of distributuion in global corporations is cash dividend. In the market we can also face the companies that do not pay cash dividend, and companies that do not pay dividend at all.Nowadays in the market economy, corporates consider the decision to pay dividends as a quite relevant, because in this way is known the remaining cash flow for investment back into the corporation and cash flow distributed to shareholders. A stable dividend policy gives positive signal to shareholders and can be seen as positive corporate performance. Therefore, this paper tends to face the policies which can be applied from companies on dividend distribution and the factors which indicates in following a certain policy.The purpose of this paper is to provide information to stakeholders about the factors which determines dividend policy and its role in today's corporations.

Searching for Determinants for Pay or Not to Paycash Dividend in Indonesia

A dividend decision of a firm is an outcome of various considerations. These considerations differ across time and industry. Based on asymmetric information - agency theory thought, this study re-examined variables that have a bearing on the dividend decision of a firm. In addition to examining the impact of c01porate fundamentals on dividend policy, the study also analyzed the effect of expropriation trigger variables (family ownership, cash funds, the level of diversification and Related Party Transaction/RPT) on a dividend policy. The results of panel logistic regression indicated that Cash Funds, RPT, Profitability, Size, Growth, Debt and Macroeconomics variables are the determinants of the dividend policy for Indonesian listed public companies, observed during 2002 to 2010.

Intraday Analysis of the Limit Order Bias at the Ex-Dividend Day of U.S. Common Stocks

This study places Dubofsky’s (1992) “limit order adjustment hypothesis” under the microscope of an intraday analysis, which employs a minute-by-minute trade and quote data recorded during the ex-dividend days of common stocks listed on NYSE, AMEX and NASDAQ. Dufosky’s (1992) model concluded that the asymmetric adjustment of open limit orders for cash dividend payments under the NYSE and AMEX rules is sufficient to create abnormal returns on the ex-dividend day. Empirical evidence shows that the limit order bias incurred due to the asymmetric adjustment of open limit orders seems to dominate the overnight ex-day returns but at the same time, it is significantly corrected via active trading up until the close of the ex- dividend day. As a result, the significant association of the ex-day price drop discrepancy with the opening limit order bias eventually disappears before the ex-dividend day close. Finally, it is found that the reversal of the limit order bias is in fact quicker in stocks which are more liquid or listed on NASDAQ where strong competition among dealers is envisaged to drive stale quotes closer to the fair adjustment of the dividend.

Controlling shareholder, split-share structure reform and cash dividend payments in China

We investigated the relationship between changes in cash dividend payments, non-public tradable shares, and the percentage ownership of the controlling shareholder in Chinese firms before and after the split-share structure reform. We found a significant reduction in cash dividends before and after the reform. Importantly, the reduction in cash dividends is significantly related to the reduction in the largest shareholder's ownership; however, it is not associated with the decline in non-publicly tradable shares. These results suggest that Chinese controlling shareholders' preference for cash dividends is attributable to the inherent illiquidity of their shares rather than non-tradability of shares.

Extracting Information on Implied Volatilities and Discrete Dividends from American Option Prices

This contribution deals with options on assets which pay cash dividends. Pricing methods which consider discrete dividends are usually computationally expensive; a first purpose of this paper is to study efficient and accurate numerical procedures which yield consistent prices for both European and American options in the presence of discrete dividends. We then analyze some methodologies to extract information on volatilities and dividends from observable option prices. Implied dividends can also be computed using a modified version of the well known put-call parity relationship. This technique is straightforward, nevertheless, its use is limited to European options and, when dealing with equities, most traded options are of American-type. As an alternative, numerical inversion of pricing methods can be used. We apply different procedures to obtain implied volatilities and dividends of listed stocks of the Italian Derivatives Market.

Why Firms Do Not Pay Dividends: The Canadian Experience

Abstract: We use a survey approach to investigate the factors leading to the decision not to pay cash dividends in Canada. Our results show that Canadian managers perceive growth opportunities, low profitability and cash constraints as the major reasons underlying a firm's decision not to pay dividends. Questionnaire results also show that, for non‐dividend‐paying firms, taxation is at best a second‐order determinant of dividend policy and that stock repurchases are not substitutes for dividends. Finally, our findings are inconclusive regarding managers’ views on the relationship between dividend policy and stock prices and the signaling role of dividend policy.

Payout Policy in Taiwan: Cash Dividends, Repurchases, and Capital Reduction

Taiwanese firms occasionally make stock repurchases or reduce capital as alternative forms of paying earnings in place of distributing cash dividends. Nonetheless, paying cash dividends is still the dominant form of payout. We examine the three payout methods from the perspectives of a firm's life-cycle stages and its capital structure by investigating TWSE-listed firms over 2000-2010. We find some impressive evidence in the Taiwan market. First, both the number of payout firms and the aggregate amount of payouts increased significantly, yet stably. Second, both earnings and payouts are highly condensed among the largest firms. Third, payout firms have a significantly higher ratio of retained earnings to equity, supporting the life-cycle theory of DeAngelo, DeAngelo and Stulz (2006). Fourth, firms making repurchases without paying cash dividends are less mature than other payers. Finally, firms conducting capital reduction are more mature than other payers, and they establish such a process in an attempt to adjust the capital structure. We provide evidence that the choice of payout method interacts with a firm's capital structure.

The role of cross-listing, foreign ownership and state ownership in dividend policy in an emerging market

In this paper, we investigate if dividend policy is influenced by ownership type. Within the dividend literature, dividends have a signaling role regarding agency costs, such that dividends may diminish insider conflicts (reduce free cash flow) or may be used to extract cash from firms (tunneling effect) – which could be predominant in emerging markets. We expect firms with foreign ownership and those that are listed in overseas markets to have different dividend policies and practices than those that are not, and firms with more state ownership and less individual ownership to be more likely to pay cash dividends and less likely to pay stock dividends. Using firms from an emerging economy (China), we examine whether these effects exist in corporate dividend policy and practice. We find that both foreign ownership and cross-listing have significant negative effects on cash dividends, consistent with the signaling effect and the notion of reduced tunneling activities for firms with the ability to raise capital from outside of China. Consistent with the tunneling effect, we find that firms with higher state ownership tend to pay higher cash dividends and lower stock dividends, while the opposite is true for public (individual) ownership. Further analysis shows that foreign ownership mediates the effect of state ownership on dividend policy. Our results have significant implications for researchers, investors, policy makers and regulators in emerging markets.

Dividend tunneling and joint expropriation: empirical evidence from China's capital market

This paper examines the association between cash dividends and the shareholders balancing mechanism (SBM) using the exogeneity and endogeneity assumptions of corporate ownership structure. This paper identifies, in the case of China, whether paying cash dividends is a means of protection or expropriation of minority shareholders’ interests. With 4810 observations from companies listed on the Shanghai Stock Exchange over the period 2004–2008, the authors find significant negative associations between cash dividend payments and the SBM of non-controlling large shareholders under the exogeneity assumption and the SBM of tradable shareholders under the endogeneity assumption. The findings suggest that cash dividends are used as a manner of tunneling by the controlling shareholder. This paper also shows that the SBM of non-controlling shareholders has a significant positive effect on cash dividends, especially for companies paying high and abnormal dividends. The results imply that in China's capital market, cash dividend payments are not only expropriations of minority shareholders’ interests by the controlling shareholder but also coalitions of controlling and non-controlling large shareholders. The findings confirm the tunneling and joint expropriation incentive of corporate dividend policy.

The Effects of Executive Stock Options and Stock Bonuses on Payout Policies in Taiwan

AbstractThis study investigates how executive stock‐based compensation affects the payout policies of a company. Stock bonuses, which are dividend‐protected, induce executives to pay out cash dividends. Conversely, stock options, which are not dividend‐protected, discourage the payment of dividends. We posit that the structure of executive stock‐based compensation plays a crucial role in determining the payout policies of a firm, particularly for those firms with higher percentages of institutional investors and shareholders with ultimate controlling power. We further examine the effects of the 2008 stock option expensing policy reform in Taiwan as well as the repercussions, if any, that this policy had on payout choices in 2009. The empirical results not only indicate that executive stock‐based compensation has a conspicuous influence on the payout policies of a firm, but also that there is a positive relation between stock bonuses and cash dividends. Furthermore, in the case of Taiwan, which has a relatively low corporate income tax rate, firms with higher percentages of shareholders with ultimate controlling power have less preference to pay cash dividends and greater preference to retain profits within the company.

Corporate Payout Policy in Dual-Class Firms

Using a sample of U.S. firms from 1995 to 2002, we examine corporate payout policy in dual-class firms. The expropriation hypothesis predicts that dual-class firms pay out less to shareholders because entrenched managers want to maximize the value of assets under control and the private benefits associated with it. The pre-commitment hypothesis predicts that dual-class firms pay out more to shareholders because firms use corporate payouts as a pre-commitment device to mitigate agency costs. Our results support the pre-commitment hypothesis. Dual-class firms have higher cash dividend payments and total payouts, and use more regular cash dividends rather than special dividends or repurchases, compared to single-class firms. Dual-class firms with severe free cash flow problems and few growth opportunities rely even more on corporate payouts as a pre-commitment mechanism. We also rule out the alternative hypothesis that dual-class firms pay out more because super-voting shareholders lack the ability to generate home-made dividends by selling shares since super-voting shares are non-tradable.

Financial Characteristics, Corporate Governance and the Propensity to Pay Cash Dividends of Chinese Listed Companies

Employing 1056 A-share listed companies in Shanghai and Shenzhen Stock Exchanges from 2001 to 2007, we analyse empirically the influence of financial characteristics and corporate governance on propensity to pay cash dividends of companies. The result shows that in the related indexes of the financial characteristics of companies, the company size, cash flow, asset liquidity, profitability as well as whether cash dividends are paid in the previous year are positively correlated with propensity to pay cash dividends of companies. Investment opportunity and debt ratio are negatively correlated with the propensity to pay cash dividends of companies. Growth has uncertain influence on the propensity to pay cash dividends. In the corporate governance characteristics, existence of controlling shareholders, stateowned shareholder as the largest shareholder, the size of the board of directors, top-management compensation and listing factors in other markets are positively correlated with the propensity to pay cash dividends of companies. Tradable share ratio and CEO duality factor are negatively correlated with the propensity to pay cash dividends of companies. Independent director factor has uncertain influence on the propensity to pay cash dividends of companies. In general, financial characteristics shows that Chinese listed companies have the capability to pay cash dividends, but the corporate governance factors have negative influence on the cash dividend payment of listed companies. Key words: The propensity to pay cash dividends; The company factor; Financial characteristics; Corporate governance