Proportion Of Shareholders Research Articles

Corporate payout policy in Australia and a test of the life-cycle theory

We provide evidence on the frequency and size of payouts by Australian firms, and test whether the life-cycle theory explains Australian corporate payout policies. Regular dividends remain the most popular mechanism for distributing cash to shareholders, despite a slight decline in the proportion of dividend payers since the relaxation of buyback regulations in 1998. Off-market share buybacks return the largest amount of cash to shareholders. Dividend paying firms are larger, more profitable and have less growth options that nondividend paying firms. Consistent with the life-cycle theory, we observe a highly significant relation between the decision to pay regular dividends and the proportion of shareholders’ equity that is earned rather than contributed.

Corporate Payout Policy in Australia and a Test of the Life Cycle Theory

We provide evidence on the frequency and size of corporate payouts by Australian firms, and test whether the life cycle theory explains Australian payout policies. Regular dividends remain the most popular mechanism for distributing cash to shareholders, despite a slight decline in the proportion of dividend payers since the relaxation of buy-back regulations in 1998. Off-market share buy-backs return the largest amount of cash to shareholders. Dividend paying firms are larger, more profitable, and have less growth options that non-dividend paying firms. Consistent with the life cycle theory, we observe a highly significant relation between the decision to pay regular dividends and the proportion of shareholders’ equity that is earned rather than contributed.

Foreign Ownership and the Risk Behavior of Chinese Banks: Do Foreign Strategic Investors Matter?

Great credit risk is a big headache which blocks the development of the banking sector of China. Based on the panel data of the Chinese banking sector from 2002 to 2006, this paper empirically examines the effects of foreign strategic investors’ participation on the risk behavior of Chinese banks. The results show that foreign strategic investors (FSI) had a positive, but limited impact on the credit risk of Chinese banks. Further analysis reveals that the risk management abilities of Chinese banks have improved apparently when the proportion of shareholding of the leading foreign strategic investors exceeds 15 percent, which results in a significant drop of the credit risk. However, due to the ‘minority ownership’ restriction on foreign investors' stock shares, the positive effect of the participation of foreign strategic investors is limited. The visible decline in both non-performing loans (NPLs) and the NPL ratio of Chinese banks mainly reflects the rapid growth of China's economy and benefits a lot from the massive financial restructuring of state-owned banks.

The Existence and Value-Relevance of Financial Analysts' Long-Term Growth Forecasts*

This paper investigates two questions. First, why do we observe analysts’ long-term earnings growth forecasts (hereafter, LTG forecasts) for some firms but not others and why do some analysts issue LTG forecasts while others do not? Second, are the LTG forecasts viewed as value-relevant by investors and do they enhance the value-relevance of stock recommendations? For the first question, at the firm level, we predict a positive (negative) relation with investors’ demand for LTG forecasts (the cost of collecting long-term oriented information). In particular, we hypothesize that the existence of LTG forecasts increases with the firm’s growth opportunities, the firm’s financial health, the proportion of shareholdings by long-horizon investors, firm size, and firm age and decrease with loss occurrence. At the analyst level, we predict that analysts with less time and resource constraints, with more experience and ability, and inputting more research effort in covering a firm are more likely to issue LTG forecasts. Empirical results are largely consistent with our predictions. For the second question, we find that the stock market responds significantly to LTG forecast revisions. In addition, the stock market responds more strongly to recommendation revisions by analysts who also issue LTG forecasts. Further, investors following the stock recommendations of analysts issuing LTG forecasts earn more trading profits than investors relying on the recommendations of analysts not issuing LTG forecasts.

A political economy analysis of preferential public procurement policies

In this paper, we analyze the role of political forces in the formation of protectionist policy in the award of procurement contract. Firstly, we consider the optimal policy designed by a utilitarian government maximizing the expected sum of the consumers' surplus and of the domestic firm's rent. Then, we characterize the awarding rule that would be optimal for a shareholders' majority and for a nonshareholders' majority and we compare the welfare effects of each rule. We show that the preferential treatment of the domestic firm increases when the proportion of shareholders having the majority decreases and that the domestic firm may have a greater expected profit when the awarding rule is left to the discretion of politicians for some high values of procurement contracts for the consumers.

Shareholders' Meeting and the Internet: Information - Communication - Decision

This paper in German language examines the impact of the internet on shareholder meetings. The author describes the steps that the German legislature has been taken towards a shareholder meeting that is based primarily on the internet, rather than the personal attendance of shareholders (as in Germany today), or a merely formal procedure (as in the U.S. today). He finds that much has been done, but more needs to be done: Traditionally, German shareholder meetings fulfill three functions: shareholders should receive information, they should communicate among each others and discuss with the board of management, as well as the supervisory board, and, finally, they should decide (voting). Strike suits, apathy of (apparently rational) foreign investors, and a lack of skill of small investors exposed the traditional concept of shareholder meetings to criticism, and drive the shareholder meeting towards a merely formal, voting-oriented procedure - a development, which we observed - f.e. - in the U.S. as well. The author holds that the internet provides solutions to these problems. He draws an idealistic picture of a legal environment that is based on a totally virtual shareholder meeting (though the expression itself might not fit anymore in the future): all shareholders will have equal access to internet-based information. Communication among shareholders and with the board will become more relevant in internet-based discussion forums than they are in a world, in which institutional shareholders look for informational advantages, small shareholders look for private benefits, and managers look for a way to avoid clear statements vis-a-vis shareholders. A merely internet-based, cross-border voting will represent a higher proportion of shareholders than today. The might of the net will help bind managers and shareholders to the interests of the firm.

Nonaudit Services and Shareholder Ratification of Auditors

The SEC changed its rules recently and required companies to disclose information about audit and nonaudit fees, asserting that such data would be useful for shareholders in making their investment and voting decisions. An analysis of shareholder votes at 172 of the Fortune 1000 companies indicates that the proportion of shareholders voting against or abstaining from ratification of the external auditor is positively associated with the level of the nonaudit fee ratio. The results provide empirical support to the SEC's assertion that disclosure of fees paid to the auditor can influence shareholders' voting decisions. However, even in companies with very large nonaudit fee ratios (exceeding 4.0), the average shareholder ratification rate was about 97 percent. This suggests that a large majority of shareholders did not perceive auditor independence to be impaired, even in the presence of relatively high nonaudit fees.