Payout Rate Research Articles

Research on Underwriting Decision-Making of Insurance Companies in Areas with Frequent Extreme Weather Based on Comprehensive Evaluation Method

The purpose of this research is to develop an insurance company underwriting model by pre-processing and model construction of collected data in order to assess whether to underwrite insurance in extreme weather-prone areas and to analyse the factors that influence underwriting decisions. In this paper, data such as insurance company payout rate, number of insured, homeowners' income in selected areas, health insurance coverage, year of construction of historical landmarks, GDP per capita, and tourism income were processed, and minimum-maximum normalisation and zero-mean normalisation were used to eliminate differences in feature magnitude. In the model construction, the logistic regression model and BP neural network were used to derive the underwriting probability, and the three main factors of natural disaster risk assessment, payout rate, and homeowner influence were introduced, and the relationship between these factors and the underwriting probability was described by the logistic distribution function, which determined that the underwriting probability should be underwritten when the underwriting probability Pi≥0.5. The natural disaster risk assessment model selects disaster factors, disaster environment and disaster receptors as assessment indicators, constructs the CEDP model, and calculates the weights using the AHP model, the Topsis model and the CPITIC weighting method, and carries out fuzzy clustering analysis on the CEDP index of 25 regions to classify the risk into five levels. For insurer profits, solvency, premium income and claims ratios were analysed, ratios based on annual claims to total premiums were calculated, and the impact of homeowners' incomes, property and historic buildings on underwriting decisions was assessed. Insurance company underwriting decision factors in areas prone to extreme weather are ultimately determined.

ANALYZING FINANCIAL RATIOS' IMPACT ON STOCKS RETURNS: CASE STUDY OF LQ45 INDEX 2014-2023

This study examines the correlation between fundamental financial metrics and stock returns of Indonesia's LQ45 Index over a 10-year period (2014-2023). The study aims to provide actionable insights for investors and companies by identifying the most critical financial metrics in predicting stock price movements. By analyzing data from 16 consistently listed Indonesian companies, the study focuses on stocks that have consistently maintained their position in the index over the past decade, a gap that has been underexplored in prior research. The study employs various statistical tests to validate the regression model, with hypothesis testing conducted through t-test and F-tests to determine the significance of financial ratios on stock returns. The analysis shows that Return on Equity, Price to Earnings Ratio (PER), Price to Book Value (PBV), Free Cash Flow per Share to Price (PFCF), and Dividend Payout Rate (DPR) have a significant positive effect on stock return. The research recommends that retail investors prioritize the PFCF ratio when evaluating potential stock investments. Transparency in financial reporting is essential, with companies encouraged to provide accurate and comprehensive financial statements, including clear reporting of key financial metrics, to build investor confidence.

Influence of Dividend Payout Rate on Financial Performance of Selected Listed Companies

The purpose of this study was to investigate the effect of dividend payout on financial performance of selected companies listed on the NSE, Kenya. The study was guided by the following specific objectives: Establish the effect of dividend payout rate on financial performance, determine the effect of dividend per share on financial performance, examine the effect of dividend yield on financial performance and determine the moderating effect of company size on financial performance of selected companies listed on Nairobi Securities Exchange. The study used longitudinal research design targeting 57 companies listed on NSE as at 31st December 2020. Purposive sampling technique was used on the target population, whereby 18 least performing companies as at 31st December 2020 were selected. A total of 90 observations were included in the dataset. Secondary data was collected mainly from NSE Handbook 2020-2021 and annual reports of the companies over five years from 2016 to 2020. The analysis involved both descriptive and inferential statistics. An empirical estimation was then carried out involving testing for stationarity of the variables, cointegration and estimating the cointegrating relation. It was expected that the output of this study provided a basis for Board of Directors and managers of companies in Kenya, Investors, Government agencies and regulatory bodies to make an informed decision and develop policies for investments. The study came with findings, made conclusions and appropriate recommendations. Based on the findings, the study concluded that dividend payout rate led to an increase in ROA of selected companies listed on Nairobi’s Securities Exchange. Therefore, dividend payout rate had a positive and significant effect on financial performance of selected companies listed on Nairobi’s Securities Exchange. When companies enhance dividend payout, there is a likelihood of improved financial performance of selected companies listed on NSE, Kenya. The study recommended that companies listed at NSE should ensure that the dividend payout rate is aligned with the company’s long-term strategic objectives. For instance, a mature, stable company may prioritize regular dividends to reward shareholders, while a growth-oriented company may reinvest profits for expansion. Furthermore, the study recommends that the government should support companies by ensuring that there are sound decision practices on dividend payout policy for the sustainability of companies. This study should be used by academicians to understand how well management allocates profits between reinvestment and shareholders returns. Dividend payout rate can be used to tell a company’s financial health and examine key financial metrices. Suggestions for further studies to be carried out in the entire East Africa Region to assess the establishment of companies in Kenya, Uganda, Tanzania, Burundi, and Rwanda, and then compare the results of those listed companies in the region. Also, more studies should be carried out in the future to investigate the effect that dividend policy contain on the expansion of the economy.

Whose firm? Resilience of the German corporate sector to financialization

Abstract We examine how financialization has progressed in the German nonfinancial corporate sector since the 2000s. Using a sample of firms historically listed in the largest German stock market indices, DAX and MDAX, we not only confirm the rise of international passive asset managers but also find a growing prevalence of controlling business families. Although executive pay increasingly consists of equity grants, indicating growing shareholder value orientation, we do not identify corporate financialization in terms of rising share buybacks and payout rates. Instead, ever larger shares of corporate funds are kept inside firms as retained earnings. While firms in the USA ‘downsize-and-distribute’ under the pressure of institutional investors, we hold that German firms ‘save-and-sit-on-it’. Although shaped by the liberalization of corporate governance regulations, this regime still relies on blockholdings and codetermination, while integrating asset managers as new providers of patient capital.

Better State Lotteries

Over the last three decades, a little-noted change has taken place in state lotteries. This change is an increase in the average payout rate, the share of sales that is returned to players in the form of prizes. Because it reduces the rate of implicit taxation on lottery purchases and its accompanying welfare loss, this change has inadvertently made lotteries better, or at least less objectionable. This paper reviews the normative case for reducing the implied tax, documents the rise in payout rates across the United States, offers an explanation for that rise, notes the starring role played by instant games, illustrates its effect on the regressivity of lottery finance, and documents the surprising correlation between the price of instant games and their payout rates.

The market for EuroMillions: jackpot sharing and implicit transfer of funds among countries

Multi-country (state) lottery markets have emerged worldwide as an attempt to revert the decline in lottery sales. These markets allow operators to offer appealing large prizes by combining the markets of separate lottery jurisdictions. An analysis of EuroMillions’ jackpot sharing among countries of different market size shows that some countries tend to claim higher jackpots and achieve higher payout rates, while others seem to be systematically disadvantaged. This paper elaborates on whether this unequal jackpot distribution is caused by different demand behavior and market share trends in the market for EuroMillions. Evidence shows that such distribution of the jackpot is explained by differences in jackpot elasticity of the demand among countries, which causes, at the same time, variations in the market share and draw winning odds per country. As a result, some countries may then benefit from the funds that have been contributed to the prize pool by the rest, raising some implicit funding issues (net payout balance) and questioning the optimality of jackpot sharing.

Current Situation, Problems and Countermeasures of China’s Insurance Industry

Insurance is a contractual economic relationship, an effective way to plan for risk and an important pillar of the financial system and the social security system. This article introduces the basic overview of Chinese insurance industry: the scale of insurance premium and the number of market players, insurance depth and insurance density, loss ratio and expense rate, claim timeliness and payout rates. And point out the difficulties meet by the insurance industry at this stage of development: difficulty to make new customers, Employees slumped, Industry losses public trust, the quality of employees is low. Then analyze the reason behind these problems. About four problems mentioned earlier, this article proposes countermeasures to solve the dilemma of Chinese insurance industry from many aspects such as employment mechanism, laws and regulations, and mass public.

Donor Advised Funds & Delay: An Intergenerational Justice Solution?

AbstractMuch writing on Donor Advised Funds (DAFs) relates to whether they ‘unduly’ delay the direct application of donated funds to achieve public benefit. However, the discussion rarely touches on a normative basis for determining what is ‘undue’ or that can be used to shape potential reforms, which are typically framed with reference to a private foundation payout rate or time limit for expending contributions. Research on charity accumulation conducted across the United States, United Kingdom, Canada, Australia and New Zealand, suggests that the normative principle of intergenerational justice is helpful for grounding such discussions (Murray, I. 2021.Charity Law and Accumulation: Maintaining an Intergenerational Balance. Cambridge: Cambridge University Press). This article considers intergenerational justice in the context of DAFs and considers whether the principle can be implemented in ways that support DAF sponsor independence and flexibility. One way that this could be achieved is by imposing (or enforcing existing) procedural obligations on decision-makers to give genuine consideration to intergenerational justice when making decisions about how much to spend and retain.

Strategic Financial Management Part II: Seasoned Equity Offerings, Corporate Payout Policy, and the Case of Regulated Utilities

As discussed in the predecessor to this article that came out roughly two years ago, each of today's three dominant academic theories of capital structure has trouble explaining the financing behavior of public companies making seasoned equity offerings (SEOs) of their own stock. In conflict with the tradeoff theory, the authors' analysis of some 7,000 SEOs by U.S. industrial companies during the period 1970‐2017 finds that the vast majority, or roughly 80%, of them had the effect of moving the companies away from, rather than toward, their target leverage ratios. Inconsistent with the pecking order theory, SEO issuers have tended to be financially healthy companies with considerable unused debt capacity. And at odds with the market‐timing theory, SEOs appear to be driven more by the capital requirements associated with the large investment projects that tend to follow them than by favorable market conditions and overvalued stock prices.Nevertheless, consistent with the tradeoff theory, the authors also find that SEO issuers tend to follow their stock offerings with one or more debt offerings that have the effect of raising their leverage back toward their targets. And whereas all of the three theories are “single‐period models” suggesting some degree of shortsightedness and “opportunism” by financial managers, the authors' findings present a picture of long‐run‐value‐maximizing strategic management of corporate capital structures—one that takes account of the company's current leverage in relation to its longer‐run target, investment opportunities, and long‐term capital requirements, and the costs and benefits associated with alternative sequences of financing transactions.Building on their earlier article, the authors extend their analysis to examine the payout and well as leverage and investment decisions of SEO issuers—and expand their sample of some 7,000 industrial issuers to include another 1,500 SEOs by regulated utilities. In the wake of the SEOs, both dividends and repurchases tend to increase; but the payout rates for utilities were almost eight times higher than for industrials, and overwhelmingly take the form of dividends rather than buybacks.In the final sections of the article, the authors first attempt to explain the negative stock price reactions to the announcements of SEOs, and then speculate about the causes of the even more negative, and puzzling, long‐run stock returns to industrial, but not utility, SEO issuers.

기업수명주기에 따른 배당정책이기업가치에 미치는 영향

This paper examines the effect of high dividend payout policy on firm value according to the corporate life cycle. For the empirical analysis, we conduct the effect of the interaction term between the corporate life cycle and the dividend payout rate measured by cash flow patterns, on Tobin's Q measured by firm value.
 According to the life cycle effect of DeAngelo et al. (2006), we expect that the high dividend payout of the maturity stage will have a more positive effect on firm value than the dividend payout of companies in other life cycles. As a result of the analysis, we confirm that the high dividend payout in the maturity stage is positively associated with firm value compared to the other corporate life cycles. In the analysis, which includes dummy variables in other corporate life cycles except for the maturity stage, the dividend payout in the introduction stage and the decline stage has a lower positive effect on firm value than the dividend payout in other corporate life cycles. On the other hand, we find that the dividend payout in the growth stage has a higher positive effect on firm value than the dividend payout in other corporate life cycles.
 As an additional analysis, we divide by market and find that the dividend payout at the maturity stage is positively associated with firm value compared to the other corporate life cycles in all markets. And the dividend payout at the introduction stage and decline stage is negatively associated with firm value. In addition, as a result of analyzing the dividend payout by dividing it by various measurement methods(dividend to sales, net income, equity), we find that the dividend payout of the maturity stage is positively associated with firm value compared to the other corporate life cycles.
 This results imply that there is a difference in the value relevance of the dividend payout policy according to the corporate life cycle. Through this, we expect that information of the dividend payout policy effects can work differently according to the corporate life cycle.

Evaluation Factors That Determine the Dividend Payout Ratio of Commercial Banks in Nigeria

The study examined the evaluation of factors that determine the dividend payout rate of commercial banks in Nigeria. The research adopted ex post facto research covering the period 2009 to 2018. Secondary data were extracted from annual reports and accounts of selected banks listed on the Stock Exchange (NSE). The data were analyzed using multiple regression techniques. Findings depict that earnings per share have a positive and nonsignificant effect on the dividend payout ratio of commercial banks in Nigeria. Retained earnings on the other hand have a negative and significant effect on the dividend payout ratio of commercial banks in Nigeria. Net profit margin and debt-equity ratio have a negative and insignificant effect on the dividend payout ratio of commercial banks in Nigeria. However, bank age has a positive and significant effect on the dividend payout ratio of commercial banks in Nigeria. The adjusted R-squared revealed that 21% of the variations in dividend payout ratio could be explained by the explanatory variables while 79% could be explained by other factors that are capable of influencing dividend payout ratio that was not studied. The implication of the findings is that only retained earnings and bank age can be used in predicting movement in the dividend payout ratio of banks in Nigeria.

Does Corporate Governance Affect Dividends? Case Study in Indonesia Stock Exchange and Malaysia Stock Exchange


 Abstract – This study aims to analyze the effect of good corporate governance such as the number of commissioners, the number of commissioner meetings, the number of female commissioners, the independent commissioners on the dividend payout ratio in manufacturing companies listed on the Indonesia Stock Exchange and the Malaysia Stock Exchange. Malaysia was chosen because has a dividend payout rate close to Indonesia. This research uses a quantitative approach using multiple linear regression methods. The research used objects of 435 observations on the Indonesia Stock Exchange and 530 observations on the Malaysia Stock Exchange. The independent variables used are independent commissioners, board of commissioners meetings, size of commissioners, female commissioners. The results of the study using observations on the Indonesia Stock Exchange found that independent commissioners have a significant positive effect while the rest have an insignificant effect on the dividend payout ratio. Meanwhile, the results of the study using observations on the Bursa Malaysia found that the size of the commissioners and board of commissioners' meetings had a significant negative effect on the dividend payout ratio. Meanwhile, independent commissioners and female commissioners have a significant positive effect on the dividend payout ratio.

Optimal control of investment, premium and deductible for a non-life insurance company

A risk-averse insurance company controls its reserve, modeled as a perturbed Cramér-Lundberg process, by choice of both the premium p and the deductible K offered to potential customers. The surplus is allocated to financial investment in a riskless and a basket of risky assets potentially correlating with the insurance risks and thus serving as a partial hedge against these. Assuming customers differ in riskiness, increasing p or K reduces the number of customers n(p,K) and increases the arrival rate of claims per customer λ(p,K) through adverse selection, with a combined negative effect on the aggregate arrival rate n(p,K)λ(p,K). We derive the optimal premium rate, deductible, investment strategy, and dividend payout rate (consumption by the owner-manager) maximizing expected discounted lifetime utility of intermediate consumption under the assumption of constant absolute risk aversion. Closed-form solutions are provided under specific assumptions on the distributions of size and frequency of claims.

Why are corporate payouts so high in the 2000s?

The average annual inflation-adjusted amount paid out through dividends and repurchases by public industrial firms is more than three times larger from 2000 to 2019 than from 1971 to 1999. We find that an increase in aggregate corporate income accounts for 37% of the increase in aggregate annual payouts, and an increase in the payout rate accounts for 63%. Firms have higher payout rates in the 2000s not only because they are older, larger, and have more free cash flow, but also because they pay out more of their free cash flow. Though firms spend less on capital expenditures in the 2000s than before, capital expenditures decrease similarly for firms with payouts and for firms without.

A perturbation approach to optimal investment, liability ratio, and dividend strategies

We study an optimal dividend problem for an insurer who simultaneously controls investment weights in a financial market, liability ratio in the insurance business, and dividend payout rate. The insurer seeks an optimal strategy to maximize her expected utility of dividend payments over an infinite horizon. By applying a perturbation approach, we obtain the optimal strategy and the value function in closed form for log and power utility. We conduct an economic analysis to investigate the impact of various model parameters and risk aversion on the insurer's optimal strategy.

How competitive are income annuity providers over time?

AbstractThe 2019 SECURE Act provides safe harbor protections to employers who evaluate the costs of providing guaranteed income including gathering information on competing providers. Annuities can be more difficult to evaluate than mutual funds because annuity expenses can be opaque, financial strength matters, and insurer competitiveness can change over time. We find significant variation in the payout rates across providers over time. While the payout rankings of annuity companies (e.g., best to worst) are fairly sticky over the short‐term, over the full period of the analysis the correlation declines effectively to zero (vs. the initial rankings). This suggests individuals or institutions who choose a single annuity provider based on income payout should revisit the decision regularly to ensure the quotes are still competitive. Companies for which immediate annuities are a higher fraction of total sales tend to rank higher and remain so more persistently over time.

Vaccination Adverse Outcomes and Costs of Vaccine Injury Claims (VICs): Past, Present and Covid-19

The US National Vaccine Injury Compensation Program (VICP) has paid out US$4,431,468,456 for 7,575 vaccine injuries from (financial years) 1989 through 2020. The average settled claim was US$585,012 per claimant. Of the total claims filed (n=22,372), 94% were claims for non-fatal injury (n=21,035) and 6% were claims for death (n=1,337). Of the total claims filed, 34% were successful (n=7,611), 52% were dismissed (n=11,671), and 14% were not progressed (n=3,090). The VICP acts as an indemnity shield for the vaccine industry. The VICP offers a non-litigious path to compensation for the vax-injured. The VICP is funded by a vax tax of US 75 cents per disease per dose. Injury claims can be rejected because the claim is filed out of time, the particular vaccine is not a VICP-listed vaccine, the injury is not a VICP-listed injury (e.g. autism is not listed), or the injury is not sufficiently severe. There were 1.39 compensated injuries per one million distributed vaccine doses (n=5,233 compensated injuries for 3,761,744,351 distributed vaccine doses; 2006 through 2018). The VICP payout rate is US$813 million for vax injuries per one billion vax doses. Based on past experience of vaccination injury, mass vaccination of billions of people for Covid-19 can be anticipated to produce vaccine injuries (including deaths). Based on the historical data of the VICP across 30 different vaccines, vaccinating a billion people with Covid-19 vaccines, can be anticipated to manifest a scenario of US$813 million of vaccine injuries (as an underestimate). Vaccinating the world's population (n=7.8 billion) with an initial Covid-19 vaccine dose may generate US$6.3 billion of vaccine injuries. A two dose Covid-19 vaccine (prime-boost regimen) may generate US$12.7 billion of vaccine injuries. A Covid-19 vax regime of (say) three booster shots may generate US$25.4 billion of vaccine injuries. These scenario extrapolations assume that the Covid-19 vaccines (although developed and administered under pandemic duress), are neither more nor less injurious than the vaccines (n=30) of VICP experience, which have been tested, certified, manufactured, stored and administered to US standards, and that there is no differential between the compensable value of US and non-US injuries.

Why Are Corporate Payouts So High in the 2000s?

The average annual inflation-adjusted amount paid out through dividends and repurchases by public industrial firms is more than three times larger from 2000 to 2019 than from 1971 to 1999. We find that an increase in aggregate corporate income accounts for 37% of the increase in aggregate annual payouts and an increase in the payout rate accounts for 63%. Firms have higher payout rates in the 2000s not only because they are older, larger, and have more free cash flow, but also because they pay out more of their free cash flow. Though firms spend less on capital expenditures in the 2000s than before, capital expenditures decrease similarly for the firms with payouts and for firms without. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Real options and the perverse effect of interest rates on investment timing

AbstractThis paper examines the relationship between investment and interest rates within the standard model of real options. We analyse the effect of interest rates on investment through the expected time until investment. The sign of the relationship is ambiguous, and critically dependent on the choice of the state variable and the parameters taken as model primitives. If the payout rate of the project (dividend yield) is taken as a model parameter, results are robust.The main novel conclusions drawn from the analysis are the following. Firstly, we provide new conditions under which increasing the interest rate accelerates irreversible investments. In particular, a raise of the interest rate favours investment when the initial value of the state variable is far from the optimal threshold; in some cases, investment is favoured independently of the value of the state variable. Secondly, the level of volatility affects the investment/interest rate relationship; in particular, a raise of the interest rate tends to favour investment in hi‐tech sectors (the opposite conclusion holds for mature sectors). Thirdly, the analysis implications remain under costless reversibility.

The Quick (Spending) and the Dead: The Agency Costs of Forever Philanthropy

American philanthropic institutions control upwards of a trillion dollars of wealth. Because contributions to these entities are deductible from both income and estate taxes, and the entities’ earnings are tax-free, that trillion dollars is heavily underwritten by contemporary taxpayers. Law offers little assurance that those who pay will be those who benefit, however. To the contrary, since these subsidies become more valuable the longer charitable assets are left unspent, law strongly encourages philanthropies to save rather than spend, even in situations of great current need. Other legal rules further encourage grant-making institutions to strive to exist “in perpetuity.” This Essay offers new empirical evidence of the social cost of forever philanthropy, that is, of institutions that long outlive their founders. Drawing on a relatively unique dataset of foundation donors, and combining it with a large archive of tax returns filed by private foundations, I search for evidence that managers of long-lasting organizations depart significantly from the preferences of the organization’s supporters. I find that a firm’s overhead, or the ratio of administrative expenses to grants made, jumps by about 12% as soon as the organization’s last living donor dies. Payout rates, or the share of assets spent each year, move sharply in the opposite direction, falling about 7% at that time. I interpret these findings as evidence of substantial agency costs. Since the timing of the donor’s death is relatively random, these outcomes offer convincing causal evidence that the ability of a donor to monitor her foundation’s managers importantly affects whether those managers follow her wishes. I argue that overhead and payout changes in the direction I observe strongly suggest that managers, once free from direct oversight, are operating the firm for their own comfort and security. Thus, by unnaturally extending the lifespan of foundations, law is encouraging wasteful allocation of taxpayer-supported charitable resources. Therefore, I suggest several policy options that would reduce the agency-cost problem. Among others, I support maintaining or increasing legal requirements for mandatory distributions by private foundations, and closing legal loopholes offered by a relatively new charitable phenomenon, the donor advised fund.