Search results

This study aims to analyze the influence of taxes and corporate governance on the dividend policy of Brazilian companies.

The authors identify the changes of the tax legislation in Brazil in the period 1986-2011 and check their effect on corporate dividend policies for preferred and common shares. The authors use panel data Probit and Tobit estimation to verify the probability of companies to pay dividends under different tax regimes. The final sample comprises 672 companies, 1,159 traded stocks and 30,134 observations

The authors’ results suggest that changes in the tax legislation have a significant influence on dividend payments. Also, firms do not follow target payout ratios, but dividends are moderately dependent on past payments. Dividend payouts are affected by stock voting rights, privatization and dividend deductibility. Changes in regulation that reduce the agency problems among shareholders affect positively payout ratios.

For managers, maximizing shareholders’ value requires taking into account the consequences of the taxation when designing financial policies for the firm. For investors, stock portfolio selection should take into account payout behavior and how changes in dividend taxation affect stocks’ value. For policymakers, the effects of changes in the tax code on corporate behavior are of utmost importance to stimulate private investment and economic growth.

There are several tax law changes in Brazil within the period analyzed, creating a good opportunity to study the effect of taxation on dividend policy and its dynamics over time.

This research surveys the recent surge of empirical studies on transfer pricing manipulation by multinational enterprises (MNEs), tax-motivated transfer pricing, particularly from the year 1990 to present. The review tackles transfer pricing income shifting behavior of MNEs from three different perspectives: taxation relationship with profitability, intrafirm trade, and foreign direct investment (FDI). There have been significant developments and contributions in this field, despite many limitations, mainly concerning the availability of micro-data in general, (specifically intrafirm trade data which allows capturing much of the heterogeneity which is dangling within inter-sectors), and the tax measurement issue. Yet, this area of study is still developing and promises more achievements.

This study will examine the impact of cash dividends on the market value of banks listed in Middle East and North African (MENA) emerging countries during the period 2000–2015.

The current study adopts residual income approach based on Ohlson's (1995) valuation model. By testing different statistical techniques, fixed effect is applied on panel data for (144) banks listed on 11 MENA stock markets over the period 2000–2015. Furthermore, additional tests are applied to confirm the primary results.

The analysis reveals that current dividend payouts and dividend yield do not provide information relevant to the establishment of market values in MENA emerging markets; thus, they have no material impact on MENA banks' market values. This lack of current dividend payment effect is consistent with Miller and Modigliani (1961) dividend irrelevance assumption: there is no evidence of either an informational or real cash inflow effect of current dividend payments. The findings of this study can be attributed to the fact that MENA banks may be forced to place more emphasis on allocating money for investment instead of paying dividends given them they are subject to liquidity requirements for investment, expansion, general operations and compliance with regulations. Only after all these financial needs are covered can the remaining surplus be distributed as cash dividends. Therefore, cash dividends represent earnings residual rather than an active decision variable that impacts a firm's market value. This is consistent with the residual dividend hypothesis, which is the crux of Miller and Modigliani (1996) irrelevance theory of dividends.

The current study is restricted to a sample of one type of financial firms, banks, because of the problem of missing data and limited information related to other financial firms for the same period. Therefore, further research could be additional types of financial firms such as insurance firms that play a vital role in MENA emerging economies.

The results of this study have some important implications for banks' dividend policymakers. Dividend policymakers in MENA emerging markets seem to follow residual dividend policy, in which they distribute dividends according to what is left over after all acceptable investment opportunities have been undertaken. This makes for inconsistent and unstable dividend policy trends, making it difficult for investors to predict future dividend decisions. Further, this practice may deliver information to shareholders about a lack of positive future investment opportunities, and this may negatively affect the share value of banks.

This study is the first of its kind – up to the author's knowledge – that examines a large cross-country sample of MENA banks (144) to cover a long time period in the recent past, and, more importantly, after the banking sector in the region has experienced major transformations during last two decades. In addition, most of the MENA region countries included in this study, namely, banks, operate in tax-free environments (there are neither taxes on dividends nor on capital gains). This feature adds complexity to the ongoing dividend debate.

This paper aims to investigate the impact of corporate dividend policy on the capital structure in the Korean stock market. To distinctly discern the voluntariness of changes in corporate dividend policy, we analyze companies that, following a substantial increase, do not reduce dividends for the subsequent two years or, after a significant decrease, do not raise dividends for the following two years. Our empirical findings indicate that companies that increase dividends experience a significant decrease in both book and market leverage, even after controlling for variables such as target leverage ratios. This result suggests that a large increase in dividends can effectively reduce information asymmetry, leading to a lower cost of equity. On the contrary, after a decrease in dividends, both book leverage and market leverage significantly increase, revealing a symmetric relationship between dividend policy and capital structure. In conclusion, large dividend increases in Korean companies not only reduce information asymmetry but also lower the cost of equity capital, resulting in observable changes in the leverage ratio.

The purpose of this paper is to examine the effect of financial derivatives usage and country’s tax environment characteristics on the relationship between financial derivatives and tax avoidance.

This study uses a cross-country analysis with the scope of ASEAN (Association of Southeast Asian Nations) countries which consists of the Philippines, Indonesia, Malaysia, and Singapore.

The level of financial derivatives usage positively affects the level of tax avoidance. This finding indicates that financial derivatives can be used as tax avoidance tool. Furthermore, the positive effect of the level of financial derivatives usage on the level of tax avoidance is lower in countries with a competitive tax environment than in countries with an uncompetitive tax environment. This finding indicates that in country with a competitive tax environment, the use of financial derivatives as a tax avoidance tool can be replaced by the tax facilities provided by that country.

This study uses four countries in the Association of Southeast Asian Nations region and does not test the sample based on the financial derivative types.

Tax authorities need to establish a clear tax regulation in regard to the tax treatment of financial derivatives transactions, e.g. define the definition of financial derivatives for hedging purposes and financial derivatives for speculative purposes; and define specific criteria to separate financial derivatives for hedging purposes from financial derivatives for speculative purposes. It is necessary to determine whether losses arising from derivative transactions are classified as deductible expenses or non-deductible expenses.

To the best of the authors’ knowledge, this study is also the first that provide empirical evidence that the relationship between financial derivatives and tax avoidance activities depends on a country’s tax environment.

This paper empirically examines whether the order of liability and preferred stock accounts presented on the balance sheet is consistent with how the stock market values their riskiness.

This paper measures a firm’s riskiness with idiosyncratic risk and employs the first-difference design to test the relation between idiosyncratic risk and the order of current liabilities, noncurrent liabilities and preferred stock, respectively. Further, the paper tests whether operating liabilities are viewed as riskier than financial liabilities. Finally, the authors partition their sample based on the degree of financial distress and investigate whether the results differ between the two subsamples.

The paper finds that current liabilities are viewed as riskier than noncurrent liabilities and preferred stock is viewed as less risky than current and noncurrent liabilities, consistent with the ordering on the balance sheet. Further, the paper finds that operating liabilities are viewed as riskier than financial liabilities. Finally, the authors find that total liabilities and preferred stock (redeemable and convertible classes) are viewed as riskier for distressed firms than for nondistressed firms.

The authors thoroughly investigate the riskiness of several classes of claims and document that the classification of liabilities and preferred stock classes is relevant to common stockholders for assessing their associated risk.

The dividend month premium is the phenomenon that firms have abnormal returns in predicted dividend month. This study aims to examine the dividend month premium in the Korean stock market, using common stocks listed on the KOSPI and KOSDAQ from January 1999 to December 2016. Abnormal returns are estimated using the following asset price models: capital asset pricing model, Fama–French three-factor model and the Fama–French–Carhart four-factor model. This study finds positive abnormal returns in predicted dividend months, and even for the within-firm portfolio that buys stocks in the predicted dividend months and sells the same stocks in other months. The price impact and the subsequent reversals are greater with lower liquidity and higher dividend yield, implying that the price pressure from dividend-seeking investors affects this dividend month premium. In addition, the anomalies with the pre-declaration stock are smaller than the post-declaration stock, suggesting the necessity to improve the cash dividend policy of post-declaration for market efficiency.

China’s economic development in the past 40 years has an array of distinctive features that have attracted the attention of the world. The paper aims to discuss this issue.

The analysis logic is as follows: with regard to the mechanism, the above factors were met in a timely manner and jointly contributed positive energy to China’s economic growth, with the increase in the savings rate as the necessary condition and foundation, and the increase in the savings rate is attributed to the explosive expansion of the financial system at the beginning of reform and the formation of positive incentives for residents, enterprises and governments at all levels, and the expansion of the financial system and the formation of positive incentives are clearly the crystallization of the wisdom of Chinese-style progressive reform.

Therefore, we have every reason to believe that the growth prospects of the Chinese economy remain bright. The author is nonetheless confident that the new two-step strategy for economic development will be realized, proposed by the 19th CPC National Congress.

Moreover, the growth of China’s economy has long been accompanied by the “double surplus” of current accounts and capital and financial accounts in the international balance of payments, which is not completely consistent with the traditional paradigm of development economics. These phenomena are so unique that the international community calls it the “Mystery of China” or “China’s Development Path.”