Payout Decisions Research Articles

Impact of Ownership Structure on Dividend Policies of Indian Non-Financial Firms

Our work is based on how ownership structure influenced and impacted dividend payment decisions of Indian non-financial companies that are listed and part of NIFTY 100. Dividend payment is one of the major financial decisions, which has potential to influence the value of companies. As part of ownership structure, which is the main independent variable of the study, we considered shareholding of promoters, foreign institutional investors (FIIs), and domestic institutional investors (DIIs) and investigated the impact of their shareholding on dividend payout decisions, which is the dependent variable in this study. We used return on assets (ROA), debt equity ratio, and size of companies as instrument variables. Our results indicated that ownership structure of Indian non-financial companies is of concentrated type and chiefly concentrated in the hands of promoters and groups. Using two-stage least squares regression model and with the help of instrument variable method, we found promoters, foreign institutional investors, and domestic institutional investors – all to be sharing a significant negative relationship with dividend payment decisions of companies, demonstrating the dominant shareholding type of companies engaged in sharing profits with shareholders in the form of dividends at lower rates and preferring to retain major chunk of profits for future investments and capital requirements.

Return on Asset dan Investment Opportunity Set dalam Memprediksi Dividend Payout Ratio Perusahaan Manufaktur Sektor Consumer Goods

Among factors that may be instrumental in affecting the dividend payout decision, this study aims to determine the effect of return on assets (ROA) and investment opportunities on dividend distribution in a company. Using secondary data from 10 Consumer Goods companies listed on the Stock Exchange in the period 2015 - 2019, the data were analyzed using panel regression using EVIEWS. This study found that ROA and investment opportunities can predict the Dividend Payout Ratio in the Consumer Goods Industry. The results suggest that the more profitable a company is, the more likely it is to pay high dividends. Also, high investment opportunities are good position increases a firm's ability to pay dividends.

Determinants of Dividend Payout Ratio: Empirical Evidence from Ethiopian Private Banks"

This study empirically examines the effect of firm specific and macroeconomic factors on dividend payout decision of the Ethiopian private commercial banks. Using panel data on eight private banks covering 2008 – 2016, the random-effect regression model results revealed that liquidity, bank size and inflation have positive and statistically significant impacts on dividend payout decision. But, the regression results suggest that bank’s growth and investment opportunity have negative and statistically significant impact on dividend payout decision in Ethiopian private banks.

Partial recall: differences between actual and self-reported annuitization decisions in Sweden

AbstractThis paper reports the results from a large telephone survey of 1,000 retiring white-collar workers in Sweden. Shortly before the interview, the participants at age 65 had a choice of receiving a life annuity by default or opting for a fixed-term payout, with a minimum payout length of 5 years. Large monetary amounts were at stake in the payout decision of the survey participants; the average monthly pension payment under the life annuity amounted to US $280. Comparing the survey responses with administrative records on actual payout choices, I find that a majority of retiring white-collar workers fail to recall their payout decision. The recollection rate is much lower among annuitants (those who chose the default option); only 40% of the annuitants accurately recalled their payout decision compared to 77% of those who opted for a fixed-term payout. Beyond payout choice, few individual characteristics predict successful recollection.

Empirical Study of the Dividend Policy of Russian Companies at the Present Stage

Many of the theoretical issues related to the company's dividend policy are highly debatable and sometimes controversial. This article presents the results of an empirical analysis of dividend payments of 50 large Russian public companies for the period from 2011 to 2018. The main source of information in the formation of the empirical base was the data of the annual accounting statements of public companies. During the study, hypotheses about the interrelations of dividend payments and market capitalization, as well as performance indicators and indicators that characterize financial and investment policies had been tested. According to the results, a number of analyzed factors, including revenue, the presence of the state and foreign investors in the ownership structure, financial leverage ratio, the absorption factor per cent, and return on invested capital turned out to be statistically insignificant. Among factors that have a statistically significant association with the dividend payments are market capitalization, net profit, return on assets, return on equity, average total assets. In the course of substantiating and making dividend payout decisions, company management should evaluate, predict and take into account the intricacies of dividend payments with financial and investment decisions. At the same time, the main task of management is to find the optimal amount of dividend payments and thus to meet the expectations of shareholders.

Does firm payout policy affect shareholders’ dissatisfaction with directors?

In this study we investigate the information content of firm payout policy to shareholders. We focus on the association between a firm’s payout policy and shareholders’ satisfaction with board directors, as expressed by the percentage of negative or withheld votes for directors during annual elections (shareholders’ dissent voting). We fill a gap in the literature by using shareholders’ voting results in the election of board members at annual meeting as a setting to examine shareholder perception of firms’ payout policies. We find that higher share repurchase and/or higher dividend payout are associated with lower shareholders’ dissenting votes. We also find that such relationship is conditional on the level of free cash flow, firm future performance, the degree of management entrenchment, and the type of institutional investors. Our study contributes to the payout literature by providing empirical evidence that shows the outcome of shareholders’ votes in director elections may be influenced by the board of directors’ payout decisions.

Brazilian Companies’ Dividend Payout in a Political Uncertainty Scenario

The analysis of the determinants of the dividend payout policy becomes even more relevant in a context of crisis. In this scenario, companies wonder which strategy shall prevail—either to keep the payout ratio constancy to signal to the market positive aspects about themselves or to adapt it to the external conjuncture, protecting themselves from future uncertainties. This being so, this study aims at identifying the determinants of the dividend payout policy, in the period before and after the former President Dilma Rousseff’s impeachment, by using logarithmic and probabilistic regression models. To this end, a sample of Brazilian non-financial publicly-held companies is considered, whose data are obtained from the Capital IQ base. As a result, the corporate dividend policy is identified as not being affected by the market environment. Such a fact indicates that Brazilian companies choose to maintain their dividend payout policy, even in scenarios of political uncertainty. This study differs from the others for analyzing the relationship between dividend payout decisions, whether in times of stability or in political and economic crisis.

Analysis of the relationship between the announcements of dividend payout decisions of football clubs and the returns of shares using the event analysis method

Purpose- Dividend is the share allocated by companies from the profit of the period to payout to their shareholder. The issue of dividend payouts seeks an answer to the question of how much of the profit obtained by companies in the fiscal year will be payed to shareholders. Investors act with two basic expectations when investing in stocks. The first is to earn dividend from the company's profit for the period, the second is to benefit from the increase in stock price and to earn capital gain. Joint stock companies may decide to payout dividends or not. In this context, announcing the decisions to payout or not to payout dividends is important for investors. Referred to as the four major football clubs in Turkey, Besiktas, Fenerbahce, Galatasaray and Trabzonspor's shares are traded on Borsa Istanbul (BIST). Like other BIST companies, clubs have investors and these investors deal with dividend payout decisions. The research aims to bridge the gap in the field. In the study, the relationship between the announcement of the dividend payout decisions of four big clubs operating in BIST and stock returns was examined. Methodology- In the study, five days before and five days after the clubs' Public Disclosure Platform (PDP) notifications were made, stock returns were analyzed using the event analysis method. 2009-2010 / 2019-2020 season data of the clubs were used in the research. Findings- According to the results obtained from the research, announcing that dividends will be payout has a significant and positive effect on stock returns, while announcing that no dividends will be payout has a significant and negative effect on stock returns. Conclusion- Research results are important in terms of revealing the effect of public disclosure announcements on performance. Accordingly, club managers can play a role in increasing financial performance by making the announcements fully, completely and on time within the framework of effective corporate management.

Explaining Dividend Payout: Evidence from Malaysia’s Blue-Chip Companies

This research investigates the explanatory factors governing the dividend payout to shareholders of blue-chip companies listed on Bursa Malaysia. In spite of continuous attention offered by empirical research on dividend payout of publicly-listed companies, paradoxically only few studies exclusively examined the explanatory factors from the perspective of blue-chip companies. Recognizing the capability of blue-chip companies to serve as a stalwart indicator of stock market condition as well as a consistent income source to shareholders, more research should be carried out for better inference on the companies' dividend payout decision. This research is using 522 observations from a sample of 18 Malaysian blue-chip companies over a 29-year period (1990 to 2019) and utilizes a panel data regression analysis for the estimation of the impact of eight factors, namely, systematic risk, leverage, free cash flow, lagged dividends, market-to-book value, profit growth, total asset turnover, and company size. Measuring dividend payout using two specifications (dividend/earnings and dividend/total assets), this research reveals that systematic risk and free cash flow have a significant and negative impact on dividend payout. Meanwhile, past year dividends, market-to-book value, profit growth, total asset turnover and company size have a significant and positive impact on dividend payout.

Modified Total Interpretive Structural Model of Corporate Financial Flexibility

In present dynamic environment, financial flexibility has become an important constituent of corporate finance decisions. Financial flexible firms are ostensibly more resilient to exogenous shock vis-a-vis non-flexible firms. Capital structuring decisions, payout decisions and conservative cash policy are various tactics adopted by financial managers for attaining financial flexibility. Present study attempts to identify key enablers of financial flexibility and structure them into a total interpretive structural model using modified TISM approach. Using literature review, business environment, cost of capital, stage of life cycle, free cash reserves, agency relations, payout policy, and leverage are identified as seven constituents of corporate financial flexibility. Based on their interpretive interdependencies/ relationship, a hierarchical model of financial flexibility is developed exhibiting a holistic view of financial flexibility decisions from triggers to final outcome. The findings result into a four-step novel framework situation-actors-actions-outcome framework of financial flexibility, with business environment and stage of life cycle as situation/ triggers, free cash reserves and agency as actors/precursors, payout and leverage as actions/ decisions and cost of financing as outcome of financial flexibility decision. Model lends credence to financial flexibility as situation-specific decision. It is a reservoir to address exogenous income and investment shocks. Firms generating free cash flow are invariably flexible to meet income and investment shocks. However, firms with fluctuating operations need buffer in form of cash reserves or debt capacity to address the contingencies. Investment in good corporate governance practices can serve as an intangible reserve and an alternative to costly tangible ways such as cash surplus and leverage. Such firms with shareholders’ support are deemed more flexible in payouts, capital structuring, investment decisions and overall operations, and less reliant on external financing.

DOES CORPORATE GOVERNANCE AFFECT THE CRITICAL CORPORATE POLICIES SUCH AS DIVIDEND POLICY?

This study examines the influence of corporate governance on dividend policy based on a sample of Canadian firms listed on the S&P/TSX composite index during 2009-2012. The results show that firms with better governance quality, measured by the governance index provided by The Globe and Mail, have larger payouts and have a higher propensity to pay dividends. In terms of four dimensions of corporate governance index, the shareholding and compensation index is the most important determinant of dividend payouts. Our results support the complementary role of corporate governance and dividend policy of the firms. The implication from this study is that managers and board of directors should make dividend payout decisions in a big picture of corporate governance.

How does CSR disclosure affect dividend payments in emerging markets?

This article examines the nexus between corporate social responsibility disclosures (CSRD) and dividend payout decisions in the context of emerging markets. Using hand-collected sample of listed firms from India, China, Indonesia, Pakistan, Malaysia, Korea, Turkey, and Russia over the period 2010–2018, our results show that CSR disclosures exert a negative impact on corporate dividend payments. Further, this effect is more prevalent for firms having higher institutional ownership. However, the results remain unaffected by the differences in legal origin i.e. civil law or common law, of the sample countries. Further, our main results are supported by a number of sensitivity tests, including reduced sample size, alternative dividend payment measures, and estimation techniques.

Private Firm and Shareholder Response to Dividend Taxation: Evidence from the Taxation of Corporate Minority Shareholders

This paper examines the response of private firms and their shareholders to a dividend tax increase, which affects only a small group of shareholders. Using an exogenous shock in Germany, my results suggest that firms do not adjust their payout policy but corporate minority shareholders, the only ones affected by the increase in shareholder taxes, reduce their minority stakes in private firms after the dividend tax reform. Additional cross-sectional tests indicate a higher shareholder response, if corporate minority shareholders are financially distressed, own a minority stake in a firm with a high dividend payout and a majority shareholder, and do not belong to the same group as the firm in which they own a minority stake. My findings add to the very limited literature on the effects of dividend taxes on payout decisions of private firms and reactions of their shareholders.

Stakeholder orientation and corporate payout policy: Insights from state legal shocks

Abstract We employ a difference-in-differences estimation approach to examine the impact of stakeholder orientation on corporate payout policy. The empirical test exploits the enactment of US state-level constituency statutes, which allow directors to consider stakeholders and long-term interests in corporate decision making. We find that firms incorporated in states that have adopted constituency statutes significantly reduce share repurchases, whereas the effects of statute enactment on total payout and dividend payments are marginal and insignificant, respectively. We further show that the negative statute effect on share repurchases is more pronounced for firms that are in financial distress or are close to default, and firms in consumer-focused and high-polluting industries. Overall, our findings indicate that promoting stakeholder orientation can have a significant impact on corporate payout decisions.

Value of dividend signaling in uncertain times

AbstractWhen investors are uncertain about firm value, they collect private information and contemplate the decisions made by management before trading. In this study, we examine the effects of policy uncertainty on managers' payout decisions and investors' reactions to these decisions. We show that managers tend to increase dividend payouts when uncertainty surrounding government policies is high. This relationship is particularly evident among better performing firms. Investors also respond more favorably to dividend increases in times of uncertainty. As a result, we conclude that policy uncertainty affects the firm's information environment owing to which managers respond to investor demand for information by paying dividends to signal firm quality.

IMPACT OF DIVIDEND PAYOUT ON THE FIRM VALUE: A STUDY OF FIRMS LISTED ON NATIONAL STOCK EXCHANGE

Maximization of firm value or shareholders wealth maximization is the prime objective of a firm. As the dividend payout decision is one of the important decisions, its impact on the firm value has been widely studied and researched topic in the area of corporate finance. In the present study the impact of dividend payout on the value of the firm has been examined on the sample of Nifty-100 index firms. Along with the Dividend Payout(DPR), Current year’s profit(CPR), Size(SIZE), Leverage(LEV), Growth Opportunities(GWOP), Market risk(Beta), Price-Earnings(PE) ratio and Age(AGE) have been considered in the model as independent variables. The result shows that, dividend payout positively related but not significantly influence on the value of the firm. Whereas, The Current year’s profit (CPR), Size (SIZE), Growth Opportunities (GWOP) and Price-Earnings (PE) are the variables significantly influence on the value of the firm. KEYWORDS: Dividend payout, value of the firm, shareholders, National Stock Exchange, market risk.

Does Social Progress Explain the Dividend Payout Decision?

This paper investigates whether national social progress influences dividend payout policy of companies around the world. Using a large database of 12,312 companies from 70 countries, for 7 years (2008-2014), I provide strong evidence that social progress is significant in relation to important corporate decisions on paying dividends. Dividend payout policy is explained by the social progress of the country in which the company is active. Access to higher education, satisfaction of basic human needs, overall wellbeing and opportunities positively influence the dividend payout ratio and the propensity to pay dividends. Moreover, the Social Progress Index may be more significant than GDP per capita in relation to dividend policy. Hence, the new measure of quantifying the population's standard of living, from the social perspective and not from the economic one, is more relevant in the decision-making process on dividend payout.

CEO and CFO equity compensation and dividend payout over the firm lifecycle

We examine the separate and joint effects of CEO and CFO equity compensation on the dividend payout decision, taking into account changes in the relationship over the firm's lifecycle. Compensation contracts and dividend payout both are used to reduce agency costs, which change over a firm's lifecycle. Studies report a negative association between CEO equity compensation and dividend payout, suggesting a substitutionary relationship. Our results show that when the two are considered jointly, CFO equity compensation dominates CEO compensation, indicating the need for sophisticated financial expertise in the dividend decision. The relationship appears only in mature firms, signifying that agency problems are of most concern during the mature stage of the firm lifecycle.

Doubling Down on Debt: Limited Liability as a Financial Friction

We investigate how a combination of limited liability and preexisting debt distort firms’ investment and equity payout decisions. We show that equity holders have incentives to “double-sell” cash flows in default, leading to overinvestment, provided that the firm has preexisting debt and the ability to issue new claims to the bankruptcy value of the firm. In a repeated version of the model, we show that the inability to commit to not double-sell cash flows leads to heterogeneous investment distortions, where high leverage firms tend to overinvest but low leverage firms tend to underinvest. Permitting equity payouts financed by new debt mitigates overinvestment for high leverage firms, but raises bankruptcy rates and exacerbates low leverage firms’ tendency to underinvest—as the anticipation of equity payouts from future debt raises their cost of debt issuance. Finally, we provide empirical evidence consistent with the model. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

주요주주의 스튜어드십 코드 참여와 기업의 배당 의사결정

주요주주의 스튜어드십 코드 참여와 기업의 배당 의사결정