The relative predictability of returns and dividends is a central issue because it forms the paradigm to interpret asset price variation. A little studied question is how dividend smoothing, as a ...choice of corporate policy, affects predictability. We show that even if dividends are supposed to be predictable without smoothing, dividend smoothing can bury this predictability. Because aggregate dividends are dramatically more smoothed in the postwar period than before, the lack of dividend growth predictability in the postwar period does not necessarily mean that there is no cash flow news in stock price variations; rather, a more plausible interpretation is that dividends are smoothed. Using two alternative measures that are less subject to dividend smoothing-net payout and earnings-we reach the consistent conclusion that cash flow news plays a more important role than discount rate news in price variations in the postwar period.
This paper was accepted by Wei Xiong, finance.
Asymmetric Cost Behavior and Dividend Policy HE, JIE; TIAN, XUAN; YANG, HUAN ...
Journal of accounting research,
September 2020, 2020-09-00, 20200901, Letnik:
58, Številka:
4
Journal Article
Recenzirano
ABSTRACT
Costs are sticky on average, that is, they fall less for sales decreases than they rise for equivalent sales increases. We examine the effect of this asymmetric cost behavior on a firm's ...dividend policy. Given investors’ aversion to dividend cuts, we predict that firms with higher resource adjustment costs and stickier costs pay lower dividends than their peers because they are less able to sustain any higher level of dividend payouts in the future. We find evidence consistent with this prediction. Further, using a regression discontinuity design that exploits variation in labor adjustment costs generated by close‐call union elections, we provide evidence suggesting that the negative relation between cost stickiness and dividend payouts is driven by resource adjustment costs. Our paper sheds new light on the determinants of dividend policy and demonstrates the role of cost behavior in corporate decisions.
Corporate social responsibility and dividend policy Cheung, Adrian (Waikong); Hu, May; Schwiebert, Jörg
Accounting and finance (Parkville),
September 2018, 2018-09-00, 20180901, Letnik:
58, Številka:
3
Journal Article
Recenzirano
Odprti dostop
This study outlines and tests two corporate social responsibility (CSR) views of dividends. The first view argues that firms are likely to pay fewer dividends because CSR activities lower the cost of ...equity, encouraging firms to invest or hoard cash rather than to pay dividends. The second view suggests that CSR activities are positive NPV projects that increases earnings and hence dividend payouts. The first (second) view predicts that firms with a stronger involvement in CSR activities should be associated with a lower (higher) dividend payouts. The finding supports the second view and is robust.
Purpose
The purpose of this paper is to identify the determinants of dividend policy in an emerging and developing market.
Design/methodology/approach
The study employs a quantitative approach using ...191 Sri Lankan firms and 1,337 firm-year observations as the sample. The authors apply a Binary Logistic Regression model to uncover the determinants of the propensity to pay dividends, and a Fixed Effect Panel Regression to investigate the determinants of dividend payout.
Findings
The authors identify past dividend decision, earnings, investment opportunities, profitability, free cash flow (FCF), corporate governance, state ownership, firm size and industry influence as the key determinants of propensity to pay dividends. In addition past dividends, investment opportunities, profitability and dividend premium are identified as the determinants of dividend payout. Moreover, there is a feedback between dividend yield and profitability in one lag and between dividend yield and dividend premium in two lags, as short-term relationships. Hence, past dividend decision or payout, profitability and investment opportunities are a common set of determinants with implications for both propensity to pay dividends and its payout. The findings support theories of dividends such as signaling, outcome, catering, life cycle, FCF and pecking order.
Practical implications
The findings are important for investors, managers and future research. Investors should focus on the determinants identified by our study when making investment decisions whereas managers should practice the same when formulating appropriate dividend policies for their firms. Future research should rely on propensity to pay dividends and its payout simultaneously to promote a theoretical consensus on the dividend determinant puzzle.
Originality/value
This is the first study that investigates determinants of propensity to pay dividends and dividend payout along with short-term relationships in a single study.
Local Dividend Clienteles BECKER, BO; IVKOVIĆ, ZORAN; WEISBENNER, SCOTT
The Journal of finance (New York),
April 2011, Letnik:
66, Številka:
2
Journal Article
Recenzirano
Odprti dostop
We exploit demographic variation to identify the effect of dividend demand on corporate payout policy. Retail investors tend to hold local stocks and older investors prefer dividend-paying stocks. ...Together, these tendencies generate geographically varying demand for dividends. Firms headquartered in areas in which seniors constitute a large fraction of the population are more likely to pay dividends, initiate dividends, and have higher dividend yields. We also provide indirect evidence as to why managers may respond to the demand for dividends from local seniors. Overall, these results are consistent with the notion that the investor base affects corporate policy choices.
We examine the association between board gender diversity and corporate dividend payout. Our results suggest that although board gender diversity impacts positively on dividend payments, this is only ...conspicuous in widely held firms. However, when ownership concentration is high, board gender diversity reduces dividend payments. We demonstrate that women directors have the greatest impact on dividend payments when there are three or more women on the board. Our results indicate that the financial crisis period was associated with high dividend payments; however, women directors restrained the payment of dividends during the crisis period. These results suggest that board gender diversity may be an effective CG mechanism for alleviating principal-agent conflicts but not principal-principal agency conflicts. Our results are robust to endogeneity, as well as alternative proxies and estimation techniques.
We examine how firms structure payout and debt commitments to address governance weaknesses. Firms with severe agency conflicts precommit through a combination of dividends and debt or through ...dividends rather than debt alone. Such firms also shift their shareholder payouts towards regular quarterly dividends—a stronger commitment than special dividends or repurchases. Although dividend commitments are implicit, event study evidence supports their credibility and value relevance for firms with weak governance. Despite harsher penalties, debt alone cannot replace shareholder payouts as a means of addressing managerial agency conflicts.
•We examine payout and debt commitments in the context of corporate governance.•Weakly governed firms precommit through dividends and debt or dividends alone.•They are less likely to precommit through debt alone.•Weakly governed firms shift the structure of their payout towards regular quarterly dividends.
We explore how co-opted directors affect dividend policy. Co-opted directors are those appointed after the incumbent chief executive officer (CEO) assumes office. Our results show that coopted ...directors lead to a weaker propensity to pay dividends and, for dividend-paying firms, significantly lower dividend payouts. We also show that board co-option has more explanatory power for dividend policy than does the traditional measure of board effectiveness, that is, board independence. Exploiting the passage of the Sarbanes-Oxley Act as a natural experiment, we show that the effect of board co-option on dividend policy is more likely causal, rather than merely an association.
The research was formed with the aim of knowing the relationship between the dividend policy and the dividend speed. This study examines the effect of the factors of investment ratio and dividend ...payment ratio on the dividend speed and it is done by relying on the financial information of the companies listed to the Tehran Stock Exchange. This research is descriptive, analytical and correlational in terms of its nature and method, which is an applied research in terms of its purpose. In this research, using a quantitative method to analyze the financial information collected from the companies listed to the Tehran stock exchange and the test of research hypotheses was discussed. The statistical sample consists of 112 companies between 2016 to 220, which investigated the research hypotheses by using the regression model and benefiting from Eviews 10, and in this way, the type of relationship and significance of the research variables was determined. The results and findings of the research indicate the existence of a positive and significant relationship between the investment ratio and the rate of dividend adjustment in the statistical sample and the absence of a relationship between the dividend payment ratio and the rate of dividend adjustment among the companies listed to the Tehran Stock Exchange. This issue shows that with a change in the investment approach of Iranian companies, their desire to provide domestic financial resources from the place of dividend will probably increase, and as a result, the level of dividend adjustment speed will also increase or decrease.
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