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1 – 10 of over 1000Dewa Gede Wirama, Komang Ayu Krisnadewi, Luh Gede Sri Artini and Putu Agus Ardiana
Using the residual dividend theory, this study examines the impact of capital expenditures and working capital on the dividend policies of publicly listed companies in Indonesia.
Abstract
Purpose
Using the residual dividend theory, this study examines the impact of capital expenditures and working capital on the dividend policies of publicly listed companies in Indonesia.
Design/methodology/approach
Using data on public companies (other than those in the financial sector) listed on the Indonesia Stock Exchange from 2011 to 2020, this study collected 870 observations (firm-years). This study employs a regression analysis technique using the STATA application program. The main variables in this study are capital expenditure and working capital, and the control variables are sales growth, firm size, leverage, profitability, liquidity and dummy variables for state-owned enterprises. The dependent variable of dividend policy is proxied by the dividend payout ratio.
Findings
This study’s results support the residual dividend theory’s hypothesis, in which capital expenditure negatively affects a company’s dividend policy. This study also analyzes this effect on companies that pay cash dividends at quantile positions of 25, 30, 50 and 60. The results show that the effect of capital expenditure on cash dividend payments is more pronounced in the case of companies whose cash dividends are in the 50th quantile. This result holds across different specification and endogeneity tests.
Originality/value
This study analyzes the residual dividend theory in Indonesian companies, focusing on localized factors and investment priorities. It challenges traditional Western dividend policies and provides empirical data that enhances the theory’s robustness. The findings have practical implications for investors, policymakers and corporate decision-makers in the Indonesian market.
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Songhee Kim, Jaeuk Khil and Yu Kyung Lee
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…
Abstract
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.
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This study aims to explore the relationship between promoter share pledging and the company’s dividend payout policy in India. Furthermore, this study also analyses the moderating…
Abstract
Purpose
This study aims to explore the relationship between promoter share pledging and the company’s dividend payout policy in India. Furthermore, this study also analyses the moderating impact of family involvement in business on the association between share pledging and dividend payout.
Design/methodology/approach
A sample of 236 companies from the S&P Bombay Stock Exchange Sensitive (BSE) 500 Index (2014–2023) has been analysed through fixed-effects panel data regression. For additional testing, robustness checks include alternative measures of dividend payout and promoter share pledging, as well as alternative methodologies such as Bayesian regression. Lastly, to address potential endogeneity, instrumental variables with a two-stage least squares (IV-2SLS) methodology have been implemented.
Findings
Upholding the agency perspective, a significantly negative impact of promoter share pledging on corporate dividend payouts in India has been uncovered. Moreover, family involvement in business moderates this relationship, highlighting that the negative association between promoter share pledging and dividend payouts is more pronounced in family companies. The findings are consistent throughout the robustness testing.
Originality/value
The present study represents a pioneering endeavour to empirically analyse the link between promoter share pledging and dividend payouts in India. It enhances the theoretical underpinnings of the agency relationship, particularly by substantiating the existence of Type II agency conflicts between majority and minority shareholders. The findings of this research bear significant implications for investors, researchers and policymakers, particularly in light of the widespread prevalence of promoter-controlled entities in India.
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Olfa Ben Salah and Anis Jarboui
The objective of this paper is to investigate the direction of the causal relationship between dividend policy (DP) and earnings management (EM).
Abstract
Purpose
The objective of this paper is to investigate the direction of the causal relationship between dividend policy (DP) and earnings management (EM).
Design/methodology/approach
This research utilizes the panel data analysis to investigate the causal relationship between EM and DP. It provides empirical insights based on a sample of 280 French nonfinancial companies listed on the CAC All-Tradable index during the period of 2008–2015. The study initiates with a Granger causality examination on the unbalanced panel data and employs a dynamic panel approach with the generalized method of moments (GMM). It further estimates the empirical models simultaneously using the three-stage least squares (3SLS) method and the iterative triple least squares (iterative 3SLS) method.
Findings
The estimation of our various empirical models confirms the presence of a bidirectional causal relationship between DP and EM.
Practical implications
Our study highlights the prevalence of EM in the French context, particularly within DP. It underscores the need for regulatory bodies, the Ministry of Finance, external auditors and stock exchange organizers to prioritize governance mechanisms for improving the quality of financial information disclosed by companies.
Originality/value
This research is, to the best of our knowledge, the first is to extensively investigate the reciprocal causal relationship between DP and EM in France. Previous studies have not placed a significant emphasis on exploring this bidirectional link between these two variables.
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Omar Esqueda and Thomas O'Connor
The authors measure the cost of equity to earnings yield differential for a sample of 2,035 non-financial firms. In a series of Logit and Tobit regressions, the authors examine if…
Abstract
Purpose
The authors measure the cost of equity to earnings yield differential for a sample of 2,035 non-financial firms. In a series of Logit and Tobit regressions, the authors examine if the cost of equity to earnings yield differential is related to dividend policy in the manner predicted by agency theory.
Design/methodology/approach
Agency theory says a firm's optimal dividend policy is partially determined by the relationship between the earnings yield and the cost of equity capital. When the cost of equity is higher (lower) than the earnings yield, firms are motivated to (not) pay dividends as this reduces the cost of capital and holding other things constant, increases corporate valuations. The authors test whether managers set dividend policies to maximize the value of the firm.
Findings
The study’s findings show that when the cost of equity is higher (lower) than earnings yield, firms are more (less) likely to be dividend payers and the payouts are higher (lower). The results are robust to the inclusion of share repurchases as an alternative to cash distributions. The study’s findings support the cost of equity hypothesis and are consistent with alternative dividend theories.
Originality/value
The study’s findings support the cost of equity hypothesis and are consistent with alternative dividend theories. To the authors’ knowledge, this is the first paper testing the cost of equity hypothesis.
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Tatiana Aquino Almeida, Cinthya Rachel Firmino de Morais and Antonio Carlos Coelho
Considering that the heterogeneity in the composition of deliberation and management bodies can promote a differentiated impact on earnings distribution policies of companies, the…
Abstract
Purpose
Considering that the heterogeneity in the composition of deliberation and management bodies can promote a differentiated impact on earnings distribution policies of companies, the purpose of this paper is to examine the marginal influence of female participation on the board of directors and executive board regarding decisions associated with dividend policy in companies operating in Brazil.
Design/methodology/approach
The sample is composed of non-financial companies listed on the B3 Stock Exchange between 2010 and 2015, which encompasses 261 companies (1,084 observations per year). The tests aim at explaining the probability of earnings distribution and the payout level of companies through variables that measure the female presence – considering that the explanatory economic attributes of decisions over dividends are kept under control. The econometric analysis was carried out through the descriptive analysis of the variables and LOGIT and TOBIT tests of inference estimated with fixed effects and meeting all econometric requirements.
Findings
The proportion of women in both deliberative and executive bodies affects marginally the dividend policy of Brazilian companies. The female presence in management bodies contributes to a higher probability of earnings distribution and increase in the payout level; such tendency is moderated when women are in the board of directors; so, we do not reject the hypothesis of female influence on dividend policy decisions in Brazil.
Originality/value
One can find such investigations in foreign environments, but such tests had not been accomplished in Brazil so far. We discuss, therefore, in an unprecedented way, the heterogeneity in deliberative (governance) and executive (management) bodies and its outcomes in strategic decisions made in Brazilian companies, focusing on the female insertion and on fundamental decisions that are related to the relationship among stakeholders, which is the dividend policy per se.
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The purpose of this paper is to observe whether the entrenchment of managers can affect firms’ dividend disbursement decisions and investor sentiment in the Tunisia context.
Abstract
Purpose
The purpose of this paper is to observe whether the entrenchment of managers can affect firms’ dividend disbursement decisions and investor sentiment in the Tunisia context.
Design/methodology/approach
The sample includes all non-financial listed stocks in the Tunisia stock exchange during the years 2004–2017. Moreover, the entrenchment of managers is measured by five proxy explained the managers rooting from all listed firms. The propensity to pay dividends is measured by the dividend yield.
Findings
The findings yield qualitatively consistent with the previous research. After controlling for the effect of a manager’s behavior and different entrenchment phase, the result shows that entrepreneurial the firm’s decision to pay dividends could be influenced by the managers’ entrenchment.
Research limitations/implications
The result is limited at the level of the non-financial companies listed in the BVMT, but in future studies, the investigation with other countries can be compared.
Practical implications
Moreover, investors in Tunisia show their preference for a dividend to self-control and satisfaction and increase their profit, especially in an abnormal economic situation explained by the Tunisian political crisis.
Originality/value
The originality of this paper is to investigate both the important role of the entrenchment and cycle life of the manager on the decision to distribute dividends and the investor sentiment. Moreover, the author’s problem may be a reference for future investigation talking about the managers’ psychology like opportunism.
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Although it has often been studied in finance research, the relationship between dividend yields and stock returns remains an unresolved issue, especially in the Korean stock…
Abstract
Purpose
Although it has often been studied in finance research, the relationship between dividend yields and stock returns remains an unresolved issue, especially in the Korean stock market. When firms continue to pay non-decreasing dividends for three or five years, they may establish a dividend reputation, which could affect this relationship. The author found firms that pay more dividends, larger firms, older firms, more profitable firms, less leveraged firms, firms with less volatile returns, firms with foreign holdings of more than 5%, and firms with more concentrated ownership build dividend reputations. The author also found that the relationship between dividend yields and future stock returns depends on a firm’s dividend reputation. The evidence shows that when firms with higher yields have dividend reputations, they produce higher future returns, whereas there is no significant relationship between yields and returns for firms with no reputation. These results are inconsistent with the findings of studies that use developed market data. In addition, when larger firms with higher growth potential and firms with less concentrated ownership have dividend reputations, future returns are higher.
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Timóteo Zagonel, Paulo Renato Soares Terra and Diogo Favero Pasuch
This study aims to analyze the influence of taxes and corporate governance on the dividend policy of Brazilian companies.
Abstract
Purpose
This study aims to analyze the influence of taxes and corporate governance on the dividend policy of Brazilian companies.
Design/methodology/approach
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
Findings
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.
Practical implications
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.
Originality/value
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.
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Trang Thi Ngoc Nguyen and Phuong Kim Bui
The purpose of this paper is to examine the relationship between dividend policy and earnings quality of Vietnamese listed firms.
Abstract
Purpose
The purpose of this paper is to examine the relationship between dividend policy and earnings quality of Vietnamese listed firms.
Design/methodology/approach
The sample includes firms listed on Vietnam stock exchange during the period between 2010 and 2016. Two measures of earnings quality are the annual firm-specific absolute value of residuals from Dechow and Dichev’s (2002) model and from Dechow and Dichev (2002) as modified by McNichols’s (2002) model. The firms’ dividend policy is captured by dividend paying status. This is a dummy variable that takes the value of 1 if the firm pays dividends and 0 otherwise. In addition, dividend yield and dividend payout ratio, which are continuous variables, are also used in this paper as alternative proxies for dividend policy.
Findings
Using panel data analysis, this paper documents that dividend payers have higher earnings quality than dividend non-payers. Dividends are an indicator of earnings quality. These findings are consistent with prior studies. After controlling for variables that may be related to earnings quality as well as for the year and industry fixed effects, this relation remains unchanged. In addition, this result is also robust after controlling for firm fixed effects.
Originality/value
This paper offers the empirical evidence on the relation between dividend policy and earnings quality in Vietnam, which is a frontier market.
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