A five-factor asset pricing model Fama, Eugene F.; French, Kenneth R.
Journal of financial economics,
04/2015, Volume:
116, Issue:
1
Journal Article
Peer reviewed
A five-factor model directed at capturing the size, value, profitability, and investment patterns in average stock returns performs better than the three-factor model of Fama and French (FF, 1993). ...The five-factor model׳s main problem is its failure to capture the low average returns on small stocks whose returns behave like those of firms that invest a lot despite low profitability. The model׳s performance is not sensitive to the way its factors are defined. With the addition of profitability and investment factors, the value factor of the FF three-factor model becomes redundant for describing average returns in the sample we examine.
Abstract
We estimate a model-free term structure of the ex ante dividend risk premium by combining two data sets with different information about future dividends. We aggregate survey forecasts about ...future dividends for single companies over multiple horizons to construct a term structure of expected S&P 500 dividend growth rates. We use European call and put option prices on the S&P 500 to estimate the term structures of options-implied dividend growth rates and risk-free rates. Applying the method to 2004–2021 data offers a new, ex ante perspective on the conditional time variation of the term structure of the dividend risk premium.
This paper investigates whether female independent directors are more likely to impose high dividend payouts. We find evidence that firms with a larger fraction of female directors on their board ...have greater dividend payouts. This finding is robust to alternative econometric specifications, and alternative measures of dividend payouts and female board representation. The positive effect of board gender composition on dividends remains when we employ propensity score matching, the instrumental variable approach, and difference-in-differences approach to address potential endogeneity concerns. Furthermore, we find that board gender composition significantly increases the dividend payout only for firms with weak governance, suggesting that female directors use dividend payouts as a governance device.
•Are female independent directors more likely to impose high dividend payouts?•Firms with a larger fraction of female directors have greater dividend payouts.•The finding remains when we address potential endogeneity concerns.•It is also robust to alternative econometric techniques and dividend payouts.•However, it is only observed for firms with weak (high) governance quality (needs).
AEUV Art. 63; EG Art 56 Abs. 1; EWGRL 435/90 Art 3 Abs. 1 Buchst a; KStG 2002 § 32 Abs. 5, § 8b Abs. 1 Art. 63 AEUV ist dahin auszulegen, dass er einer Bestimmung in der Steuergesetzgebung eines ...Mitgliedstaats entgegensteht, die die Erstattung der Kapitalertragsteuer auf Dividenden, die aus unterhalb der – von der Richtlinie 90/435/EWG des Rates v. 23.7.1990 über das gemeinsame Steuersystem der Mutter- und Tochtergesellschaften verschiedener Mitgliedstaaten in der durch die Richtlinie 2003/123/EG des Rates v. 22.12.2003 geänderten Fassung vorgesehenen – Schwellenwerte liegenden Beteiligungen stammen und an eine in einem anderen Mitgliedstaat ansässige Gesellschaft ausgeschüttet werden, von dem Nachweis abhängig macht, dass die Steuer bei dieser Gesellschaft oder ihren unmittelbaren oder mittelbaren Anteilseignern nicht angerechnet oder als Anrechnungsvortrag berücksichtigt oder abgezogen werden kann, während eine solche Bedingung für die Erstattung der Kapitalertragsteuer, die eine gebietsansässige Gesellschaft, die Einkünfte gleicher Art bezieht, entrichtet, nicht vorgesehen ist. (amtl.) EuGH, Urt. v. 16.6.2022 – C-572/20 – ACC Silicones (FG Köln v. 20.5.2020 – 2 K 283/16)
ABSTRACT
Dividends are a key mechanism for shareholders to discipline managers and mitigate agency conflicts. This study examines whether the volatility of tax payments is associated with dividend ...payouts. Consistent with the predictions, results suggest that firms with more volatile tax payments are less likely to pay dividends overall and their dividends are lower in magnitude when doing so. These effects are economically significant and incremental to a firm's operating risk. The link between volatile tax payments and the likelihood of dividend payouts is weaker for firms that distribute dividends to alleviate agency conflicts. Similarly, the link between volatile tax payments and the amount of dividend payouts is weaker for firms that hold more cash for tax reasons. Taken together, these findings add to our understanding of the economic consequences of volatile tax payments and the determinants of dividend payouts.
RÉSUMÉ
Irrégularité dans les paiements de l'impôt et les versements de dividendes
Les dividendes représentent un mécanisme clé permettant aux actionnaires de discipliner les gestionnaires et d'atténuer les conflits entre mandant et mandataire. Cette étude examine si l'irrégularité des paiements de l'impôt est associée aux versements de dividendes. Conformément aux prédictions, les résultats suggèrent que les entreprises dont les paiements de l'impôt sont plus irréguliers sont généralement moins susceptibles de verser des dividendes et que leurs dividendes sont alors moins substantiels. Ces effets sont économiquement significatifs et augmentent le risque opérationnel de l'entreprise. Le lien entre l'irrégularité des paiements de l'impôt et la probabilité de verser des dividendes est plus faible pour les entreprises qui distribuent des dividendes afin d'atténuer les conflits entre mandant et mandataire. De même, le lien entre les paiements d'impôts irréguliers et le montant des versements de dividendes est plus faible pour les entreprises qui détiennent plus de liquidités pour des raisons fiscales. Dans l'ensemble, ces résultats améliorent notre compréhension des conséquences économiques de l'irrégularité des paiements de l'impôt et des facteurs déterminants des versements de dividendes.
RL 90/435/EWG Art. 4, Art. 7 Abs. 2; AEUV Art. 267 Art. 4 Abs. 1 der Richtlinie 90/435/EWG des Rates vom 23.7.1990 über das gemeinsame Steuersystem der Mutter- und Tochtergesellschaften verschiedener ...Mitgliedstaaten ist dahin auszulegen, dass er einer nationalen Regelung entgegensteht, nach der eine Muttergesellschaft bei der Weiterausschüttung von durch ihre Tochtergesellschaften ausgeschütteten Gewinnen an ihre Anteilseigner einen Steuervorabzug schuldet, der zur Gewährung einer Steuergutschrift führt, wenn diese Gewinne nicht mit dem allgemeinen Satz der Körperschaftsteuer besteuert wurden, sofern die aufgrund dieses Vorabzugs geschuldeten Beträge über die in Art. 4 Abs. 2 dieser Richtlinie vorgesehene Obergrenze von 5 % hinausgehen. Eine solche Regelung fällt nicht unter Art. 7 Abs. 2 der Richtlinie 90/435. (amtl.) EuGH, Urt. v. 12.5.2022 – C-556/20 – Schneider Electric (Vorabentscheidungsersuchen des Conseil d’État – Staatsrat, Frankreich – v. 23.10.2020)
Evaluating agency theory and optimal contracting theory views of corporate philanthropy, we find that as corporate giving increases, shareholders reduce their valuation of firm cash holdings. ...Dividend increases following the 2003 Tax Reform Act are associated with reduced corporate giving. Using a natural experiment, we find that corporate giving is positively (negatively) associated with CEO charity preferences (CEO shareholdings and corporate governance quality). Evidence from CEO-affiliated charity donations, market reactions to insider-affiliated donations, its relation to CEO compensation, and firm contributions to director-affiliated charities indicates that corporate donations advance CEO interests and suggests misuses of corporate resources that reduce firm value.
We compare the payout policies of US industrials and banks over the past 30 years to better understand dividends, especially for banks. For industrials, dividends grow strongly after 2002, when the ...declining propensity to pay reverses. Banks have a higher and more stable propensity to pay dividends and resist cutting dividends as the 2007–2008 financial crisis begins. Before the crisis, increases in repurchases push payouts to historic levels. These findings are broadly consistent with the idea that banks use dividends to signal financial strength while agency costs of free cash flow better explain industrial payouts.
Xiao (2009) develops a novel estimation technique for quantile cointegrated time series by extending Phillips and Hansen’s (1990) semiparametric approach and Saikkonen’s (1991) parametrically ...augmented approach. This paper extends Pesaran and Shin’s (1998) autoregressive distributed-lag approach into quantile regression by jointly analyzing short-run dynamics and long-run cointegrating relationships across a range of quantiles. We derive the asymptotic theory and provide a general package in which the model can be estimated and tested within and across quantiles. We further affirm our theoretical results by Monte Carlo simulations. The main utilities of this analysis are demonstrated through the empirical application to the dividend policy in the US.
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