Dividends To Shareholders Research Articles

“It’s a Business”: Student Affairs Practitioners’ Transition From a Not-for-Profit to For-Profit Institution of Higher Education

In this phenomenological inquiry the author examined the experience of transitioning from student affairs work at not-for-profit colleges and universities to work in institutions of higher education that generate revenue or dividends for owners, investors, or shareholders, commonly called for-profit institutions. Multiple interviews with 11 participants yielded 5 themes: a focus on business, the purpose of student affairs work, position role and responsibilities, the supervisory relationship, and alternate preparation for for-profit work. Implications are addressed, including the process, setting, and context of work; making one’s philosophy explicit; the role of graduate preparation programs; and position level and gender.

Prioritization of the Factors Affecting Bank Efficiency Using Combined Data Envelopment Analysis and Analytical Hierarchy Process Methods

Bank branches have a vital role in the economy of all countries. They collect assets from various sources and put them in the hand of those sectors that need liquidity. Due to the limited financial and human resources and capitals and also because of the unlimited and new customers’ needs and strong competition between banks and financial and credit institutions, the purpose of this study is to provide an answer to the question of which of the factors affecting performance, creating value, and increasing shareholder dividends are superior to others and consequently managers should pay more attention to them. Therefore, in this study, the factors affecting performance (efficiency) in the areas of management, personnel, finance, and customers were segmented and obtained results were ranked using both methods of Data Envelopment Analysis and hierarchical analysis. In both of these methods, the leadership style in the area of management; the recruitment and resource allocation in the area of financing; the employees’ satisfaction, dignity, and self-actualization in the area of employees; and meeting the new needs of customers got more weights.

Shareholder Protection, Ownership, and Dividends: Russian Evidence

ABSTRACTThis article investigates the relation between corporate governance mechanisms and dividend policy in Russian firms. Using a sample of Russian listed firms over the period 1998–2003, we estimate models for dividend pay probability and payout size. We find that there has been a significant increase in dividend payout levels which coincide with improvements in legal shareholder protection. State controlled firms are more frequent dividend payers as compared to other majority owned firms. We also find that dual share firms, in which corporate charters protect minority interests, have a higher dividend pay probability; while firms reporting according to US GAAP, which may be less likely to manipulate earnings, have a lower dividend payout.

Foreign Portfolio Investment and Shareholder Dividend Taxes

ABSTRACTWe investigate the effects of dividend taxes on foreign equity portfolio holdings. Based on the extension of an equilibrium model with risky assets to an international setting, we predict that a change in the tax rate on dividends of a country's domestic investors is positively related to changes in foreign investors' portfolio holdings in that country. The evidence from two research settings, which exploit changes in the national tax policies of different countries, supports this prediction. More generally, the model predicts that a foreign investor's equilibrium portfolio holdings in a country are negatively related to the dividend tax rate that she directly pays on assets in that country and positively related to the weighted-average dividend tax rate of worldwide investors in that country. Results from analyses using panel data provide empirical support for these predictions.

Managing Capital and Insolvency Risk via Internal Capital Market Transactions: The Case of Life Insurers

Understanding the movement of capital between insurers and affiliated companies under common ownership is important for understanding insurer insolvency risk and the impact of regulatory policies regarding capital standards and group supervision. Aggregate data indicate that life insurers received substantial internal capital contributions from other entities in their group and decreased the internal shareholder dividends paid during the financial crisis. Panel data estimates indicate that, on average, a dollar decrease in net income when net income is negative is associated with a $0.32 increase in capital contributions from other entities in the group, and that a dollar increase in net income when net income is positive is associated with a $0.56 increase in the amount of internal shareholder dividends paid by the insurer to other entities in the group. Also, insurers with low (high) risk-based capital ratios receive more (less) internal capital contributions than other insurers. While the sensitivity of internal capital movements to performance and capitalization is concentrated in groups with a large number of affiliates, insurers in these groups do not on average, holding other factors constant, have lower capital or lower liquidity ratios than insurers in groups with less active internal capital markets.

The Effect Of South African Dividend And Capital Gains Taxes On Share Prices And Investor Expected Returns

<p>We examine the effect of South African taxes, specifically the secondary tax on companies (STC) and the dividends tax (DT) that replaced it, as well as capital gains tax (CGT), on investor measures of expected return and firm value. The discussion, findings, and models presented in this study are entirely original in the field of South African corporate finance research. We model the relationship between STC, CGT, and expected return and use this relationship to formulate an hypothesis of the expected behaviour of ex-ante measures of implied cost of capital for a sample of listed South African companies. We calculate these measures by formulating a unique South African version of the residual income valuation model (RIVM) and then regress derived measures of the implied equity premium on historical measures of dividend yield, ultimately concluding that investors appear to recognise the net tax benefit of dividends and capitalise this benefit into stock prices. Finally, we examine the expected position of each of these areas in light of the proposed shareholder dividend tax regime.</p>

Controlling shareholder entrenchment: Bonuses versus dividends

An excess of control rights over cash flow rights (deviation), resulting in controlling shareholder entrenchment, is a common corporate governance problem in East Asian companies. This study examines whether control rights and cash flow rights deviations affect companies' earnings distribution policies in Taiwan. The results indicate that, regardless of whether voting rights or the number of directors on company boards are used to measure control rights, companies with higher degrees of deviation between control and cash flow rights pay disproportionately large shares of company earnings in employee bonuses relative to shareholder dividends. Severe deviation companies are biased in favor of employee compensation at the expense of minority shareholders. These companies are more likely to expropriate minority shareholders through controlling the boards of directors and paying cash bonuses to employees.

The Relative Cost of Internal vs. External Equity in South Africa: The Impact of Capital Gains and Dividend Taxes

In order to investigate the impact of South Africa’s unique historical secondary tax on companies (STC) on optimal capital structure, we adapt the US methodology developed by Lewellen and Lewellen (2006) to cater for STC. Using our derived STC-models, we examine the combined effect of South Africa’s capital gains tax and, respectively, its historical and current dividend tax regimes, on the relative costs of internal and external equity, and thus the theoretical optimal South African capital structure both historically and currently. We examine the expected position of each of these areas in light of South Africa’s transition from STC to the new shareholder dividend tax (SDT) regime that replaced it on 1 April 2012. We conclude that there is a net tax benefit to utilising internal equity under certain conditions and that firm financing and payout decisions that ignore this benefit are fundamentally incomplete.

Manager-Shareholder Alignment, Shareholder Dividend Tax Policy, and Corporate Tax Avoidance

We exploit exogenous changes in country-level corporate-shareholder tax integration systems to identify the effect of investor-level taxes on corporate tax avoidance. Specifically, we rely on the elimination of imputation systems by European countries in different years, in response to supranational judicial rulings. Under an imputation system, lowering corporate tax payments does not increase the cash flows available to shareholders after dividend taxes, but it does so after their elimination. Using a difference-in-difference model with fixed effects, we find that the average firm affected by the change reduces its cash effective tax rate by 17% relative to the eliminating group’s average statutory tax rate. Additional placebo tests provide evidence that supports this effect is present only in the countries and years in which the elimination occurs. Our results are partially driven by shifting income to foreign countries. Lastly, as expected, our results are more pronounced in closely held firms, firms with lower foreign income and firms with higher dividend payout.

The Evolving Social Responsibilities of Internet Corporate Actors: Pointers Past and Present

Internet corporate behaviour is slowly showing movement from mere legal compliance towards responsible behaviour. Long-evolved off-line Best Practice for corporate voluntarism is, however, largely absent from the Internet. As a result, corporate efforts to act on societal issues beyond the shareholder dividend suffer avoidable shortcomings in design, delivery and recognition. Internet corporate actors can secure greater acknowledgement for their efforts and enjoy greater success, if they involve other interested parties in these efforts from inception, and commit to continuous improvement of their initiatives on the basis of transparent reporting and structured feedback.

The bonus pool, mark to market and free cash flow: producer surplus and its vesting in the financial markets

Regulatory proposals that seek to limit or govern finance industry bonuses in the interests of systemic stability need to be grounded in the financial economics of producer surplus and its distribution. In this respect, existing treatments of economic agency in justifying large bonus awards are content to accept accounting Profit and Loss (P&L) numbers as a basis for the managerial bonus pool. We argue that managerial bonuses and shareholder dividends should be treated more symmetrically, and constrained by free cash flow criteria that capture producer surplus created by genuine managerial ability. Priority rules should apply, such that fair market value is a compensation for shareholder risk bearing and not a source of managerial surplus. The use of free cash flow conversion ratios neutralises the free option problem that has become a social irritant in public bailouts.

The Effect of the Shareholder Dividend Tax Policy on Corporate Tax Avoidance

This study adds to the growing policy debate on corporate tax avoidance by investigating the effects of shareholder dividend tax policies on the incentives of managers to avoid corporate taxation. One such tax policy, imputation systems, eliminates the double taxation of corporate earnings by crediting the shareholders for the amount of corporate taxes that the corporation pays. As a result, corporate tax avoidance under an imputation system simply shifts the burden to the shareholders. It does not reduce the overall tax burden of the shareholders. For firms, which are subject to imputation systems, corporate level tax avoidance is less desirable for shareholders and firm value because tax avoidance structures are costly and provide no additional after-tax cash flows to shareholders. We find that firms from countries with imputation system have significantly lower corporate tax avoidance relative to firms from countries with non-imputation systems. We also find that firms from countries with full imputation systems avoid less tax than firms from countries with only partial imputation systems. However, both groups still avoid taxes less than firms from countries with no imputation system. Furthermore, we exploit exogenous changes in imputation systems around the world and find that firms from countries that shift away from imputation systems increase their tax avoidance after the change in policy after controlling for a matched group of firms from countries that do not change systems. Overall, our results suggest that country level shareholder dividend tax policy can significantly alter managerial incentives to avoid corporate taxation. Our findings have significant implications for our understanding of managerial incentives to avoid tax, for the debate over tax reform and for the unintended consequences of EU harmonization.

Stock Repurchases and TARP in the Financial Industry

In this paper, we examine the relation between the inadequate levels of capital during the recent financial crisis and the shareholder dividend and stock repurchase activities in the banking industry. In 2008, the Treasury Department initiated a bailout of the banking industry through the Troubled Asset Relief Program (TARP). Over the years leading up to this bailout, 2004-2007, shareholder payout activity increased dramatically. We first explore the efficient capital market motivations for the share repurchases of our sample of banking firms. Consistent with studies in the non-financial industry we find some support for the excess cash, undervaluation, and stock compensation hypotheses. However, we observe a structural shift in the model in 2007 that is inconsistent with efficient capital market behavior. Next, we explore the relation between firms that accepted funds from the Capital Purchase Program (CPP), the largest program within TARP, and the increasing levels of shareholder payouts. We find that firms that accepted CPP funds returned a higher proportion of their available capital to shareholders in the periods leading up to the financial crisis than firms that did not accept CPP funding. Finally, we document the improvement in for the capital adequacy of the CPP participant firms, and we provide anecdotal evidence on the impact of CPP on the largest four participating banks.

The Oil Curtain and the Evolution of National Oil Companies

Management Sketch out the global landscape of reserves and production and its most salient features would be the growing appetite for oil and gas and the drive for reserves replacement from frontiers and mature fields. In the background lie the cycles of "feast or famine" and the long lead times that govern investment and returns. Tantalizingly hidden away is the essence of the industry—petroleum reserves. The Oil Curtain neatly symbolizes resource sovereignty and separates the hydrocarbon "haves" from the "have nots." It has led to the major part of proved global oil reserves being booked by national or state oil companies (NOCs). To illustrate the change of ownership, in 1971 NOCs held 30% of total global reserves while international oil companies (IOCs) held 70%. Today NOCs have increased their share to 93% while IOCs hold 7%. What caused such a dramatic reversal in fortune? Since the early 1900s the importance of oil in financial, political, and strategic matters has been bubbling up to the surface. Eventually, this led to a pressing need for producing states to control oil. Mexico was first to "shut" the oil curtain by nationalizing its oil assets and forming the wholly state-owned Pemex (Petróleos Mexicanos) in 1938. By 1960, resource sovereignty had fully matured into a global force and the Central Bank of Oil—the Organization of the Petroleum Exporting Countries (OPEC)—was created. OPEC's central message was clear: oil was too important to leave in the hands of foreigners. It would seek to regulate "oil rents" and end arbitrary payments from foreign oil companies. OPEC's thinking was shaped threefold. First, deals favored foreign oil companies and foreign governments, not producing states. Foreign oil companies also controlled an outward flow of profits, which were often the greater part of producing countries’ gross domestic product. Generally, beneficiaries were foreign governments either directly through shareholder dividends or indirectly through taxes. Secondly, foreigners took vital political decisions affecting the sovereignty of producing countries. Oil production, foreign exchange earnings through oil sales, and ultimately, national debt were being dictated by foreign oil companies. Lastly, the military and naval campaigns of the Second World War combined with the utility of oil in general transportation left no doubt that oil was a primary strategic asset.

The Effects of Shareholder Dividend Taxes: Evidence from the Australian Tax Integration Environment

In this paper we empirically test the Harris et al. (2001) model in the unique setting of the Australian stock market. In 1987, Australia changed from a traditional tax system (two levels of taxation) to an integrated tax system (one level of taxation). We estimate the parameters of the Harris et al. (2001) model for a sample of Australian firms across the change in the tax regime. We also refine our analysis to allow for differences between firms with regard to tax credit position (that is, the extent to which they shield shareholders from individual-level taxes) in the post-integration period. Our results are consistent with the model predictions with respect to the change in tax regime and between high- and low-credit firms in the post-integration period.

Are shareholder dividend taxes on corporate retained earnings impounded in equity prices? Additional evidence and analysis

The purpose of this paper is to evaluate the model used by Harris and Kemsley (J. Acc. Res. 37 (1999) 275), Harris et al. (J. Public Econ. 79 (2001) 569) and Collins and Kemsley (Acc. Rev. 75 (2000) 405), hereafter CHHK, and to investigate their empirical results. We demonstrate that the model underlying CHHK is flawed, and show that their interpretation of the data is incorrect. Finally, we find that after controlling for market to book ratio, Harris and Kemsley's first main result vanishes. In total, we reject CHHK's conclusions that equity prices are discounted for shareholder dividend taxes on retained earnings.

Can Independent Distribution Function as a Mode of Corporate Governance?: An Examination of the UK Life Insurance Market

This paper examines whether independent modesof distribution can act as effective externalmonitors of managerial action. Becauseindependent agents are owners of the clientlist, control of an essential cash-generatingasset is concentrated in the hands of informedpurchasers. A consequence of this concentrationis the ability of independent agents tochastise bad management by moving customers toalternative management teams. Therefore,insurance companies that use independent agentsshould exhibit lower levels of opportunisticbehaviour. By studying 42 UK life insurancecompanies over the period 1990–1997 this studyprovides evidence that independent agents doreduce life companies' free cash flow,managerial expenses and shareholder dividends,while increasing policyholders' reserves.

Personal Taxation in Firm Market Valuation: Theory and Test

In this paper, I extend Ohlson's 1995 firm market valuation model to incorporate personal taxes: the taxes on dividends and the taxes on capital gains. Without personal taxes, firm market value can be expressed as the present value of future benefits received by the shareholders (dividends, in this case). With personal taxes, the benefits received by the shareholders should be classified into three categories (due to their different tax treatments): dividends, share repurchases, and new share issues (i.e., contributed capital). The extended model shows the effects of personal taxation on firm market valuation: retained earnings are valued less than contributed stocks, both dividends taxes and capital gains taxes affect retained earnings valuation and firm market value, and firms choose cash distribution methods (paying dividends and repurchasing shares) to increase their retained earnings valuation, therefore increasing their market value. An empirical test using a sample from the Disclosure Select Canada and Financial Post Card data bases for the years 1995-98 supports these personal tax effects.

Are Shareholder Dividend Taxes on Corporate Retained Earnings Impounded in Equity Prices?: Additional Evidence and Analysis

Recently, several studies have concluded that individual investor level dividend taxes on corporate retained earnings are impounded in common stock prices, independent of the timing of dividend payments. We show that the model underlying these studies is internally inconsistent. We also discuss why the model of dividend tax capitalization described in these recent studies is not likely to be descriptive of the taxation of corporate distributions, and we present several reasons, with corroborating data, to believe that common stock prices are not affected by dividend taxes in the manner articulated in these studies. Our empirical results can be summarized as follows. We replicate some of the basic results of prior dividend capitalization studies. We test for evidence of dividend tax capitalization around tax rate changes resulting from the ERTA81, the TRA86 and the OBRA93. Using the same methodology employed in recent research, the evidence does not support dividend tax capitalization across the three tax regimes. We also perform numerous additional data analyses that in general produce results that do not support the conclusions of recent dividend tax capitalization studies. Finally, we find that after controlling for market to book ratios, the main results in prior studies vanish. Overall, the analyses and evidence in this study indicate that shareholder dividend taxes on corporate retained earnings are not impounded in stock prices.

Holiday Inn

Although it's the largest hotel chain in the world and one of the oldest, Holiday Inn Worldwide can be considered one of the newest companies in the hotel industry. As chronicled in this article, Holiday started as a franchising vehicle for hotels and then diversified into related businesses. In the 1980s it became a gaming operator and also operated additional lodging brands. To avoid the possibility of a corporate takeover, Holiday's management recapitalized the company in 1987 by selling assets, paying an immense shareholder dividend, and taking on debt. A second recapitalization in 1989 was a springboard for the spin-off and sale of the Holiday Inn brand to Bass PLC. The other portions of the former Holiday Corporation, including the gaming operation, did business as Promus Corporation. Saddled with considerable debt and facing the uncertain prospects of the 1990s, Bass has developed a new strategy for Holiday Inn Worldwide that includes converting older inns to the new Holiday Inn Express (limited service) concept. In addition, Holiday is experimenting with SunSpree Resorts, a resort concept intended to fill a gap in the market for moderate-price resorts.