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1 – 10 of over 8000Hicham Sbai, Ines Kahloul and Jocelyn Grira
This paper aims to examine the determinants of the dividend distribution policy in a banking setting.
Abstract
Purpose
This paper aims to examine the determinants of the dividend distribution policy in a banking setting.
Design/methodology/approach
Using a sample of 48 Islamic banks and 94 conventional banks from 15 Islamic countries over a period spanning from 2012 to 2019, we document the effect of board gender diversity, executive director profile and governance mechanisms on dividend payment decisions. We also analyze the moderating effect of Islamic banks on the relationship between gender diversity and dividend policy.
Findings
We find new evidence on the role of women directors in determining dividend distribution policy and confirm the risk aversion hypothesis, hence contributing to the ongoing debate on gender diversity literature. Our results show that the moderating role of Islamic banks is effective only for small banks.
Practical implications
Our findings have practical implications for shareholders, managers and financial analysts as they suggest rationalizing dividend distribution strategies.
Originality/value
Our study contributes to the growing body of knowledge on dividend policy, gender diversity and Islamic banks.
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Yen-Yu Liu, Pin-Sheng Lee and Chih-Hao Yang
This study aims to discuss whether a new accounting policy can help enterprises withstand operating risks and whether corporate governance can play a supervisory role. Taiwan took…
Abstract
Purpose
This study aims to discuss whether a new accounting policy can help enterprises withstand operating risks and whether corporate governance can play a supervisory role. Taiwan took the lead worldwide in allowing companies to distribute cash dividends from capital reserves. Compared with traditional cash dividends distributed from retained earnings, this move was aimed at maintaining the stability of cash dividends and helping listed companies address the risks of temporary downturns. However, the distribution of cash dividends from capital reserves may violate the principle of capital maintenance and damage creditors’ equity. The authors sought to examine whether corporate governance could play a supervisory role.
Design/methodology/approach
The present study targeted Taiwanese listed companies and cited data from the Taiwan Economic Journal. The study period was from 2011–2019. The authors tested the hypotheses using the least square method.
Findings
The results showed that ultimate controlling shareholders of listed companies can maximize their own interests through ownership arrangements, whereas corporate governance cannot play a supervisory role nor protect creditors’ equity. The findings provide insight on whether, in the development process of corporate governance, appropriate measures are taken to protect creditors’ equity in addition to shareholders’ equity, or achieve a good coordination of interests among all stakeholders.
Originality/value
The ultimate controlling shareholders or directors of a listed company would seek to maximize their own interests, and transfer the operating risks to creditors through the arrangement of dividend policy, thus harming creditors’ equity. However, independent directors cannot play a supervisory role. The authors inferred that corporate governance standards previously focused on the shareholder level or alleviation of the agency problem between controlling shareholders and non-controlling shareholders but ignored creditors’ equity.
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The purpose of this paper is to explain the Regulated Investment Company Modernization Act of 2010, P.L. 111‐325, signed into law on December 22, 2010.
Abstract
Purpose
The purpose of this paper is to explain the Regulated Investment Company Modernization Act of 2010, P.L. 111‐325, signed into law on December 22, 2010.
Design/methodology/approach
The paper summarizes the Act and provides a detailed explanation and analysis of each of the provisions in the Act.
Findings
An investment company registered under the Investment Company Act of 1940 may elect to be taxed as a Regulated Investment Company (RIC) under the Internal Revenue Code. A RIC that satisfies certain additional minimum distribution requirements is generally allowed to deduct the amount of dividends paid to its shareholders in computing the RIC's taxable income and gains, with the result that the RIC's distributed net income and gains can be passed through to its shareholders free of tax at the RIC level. The Act makes a number of changes to the provisions in the Code related to RICs.
Originality/value
The paper provides practical guidance from experienced financial services lawyers.
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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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Manon Deslandes, Suzanne Landry and Anne Fortin
– The purpose of this paper is to examine whether the significant dividend tax rate reduction for individual investors in Canada in 2006 affected firms’ payout policies.
Abstract
Purpose
The purpose of this paper is to examine whether the significant dividend tax rate reduction for individual investors in Canada in 2006 affected firms’ payout policies.
Design/methodology/approach
Using regression models, the authors examine the impact of the 2006 dividend tax cut on dividends and share repurchases in Canadian listed firms from 2003 to 2008. The authors also ran a multinomial logit regression to examine choices between payout policies.
Findings
Following the tax cut, firms increased their dividend payouts, with larger increases for firms in which shareholders benefited from the reduced tax rate. However, the 2006 tax cut appears to have had no negative effect on distributions through share repurchases. After the 2006 dividend tax cut, firms owned by shareholders subject to dividend taxes were more likely to use a combination of distribution mechanisms than share repurchases only, dividends only, or no payouts.
Practical implications
Shareholders’ tax preferences are an important factor for firms to consider when designing payout distribution policies. Following the 2006 dividend tax cut, firms increased their dividend payouts.
Social implications
The findings provide tax regulators with insight into how firms react to tax reform. They suggest that firms adapt their payout policy in the face of: a noteworthy dividend tax cut (6.2 per cent); a dividend tax cut that does not encourage tax arbitrage; and a dividend tax cut that does not economically favour dividend payment over share repurchases.
Originality/value
The paper considers the 2006 dividend tax rate cut in Canada, which presents a number of significant features that allow capturing the effect of a tax cut on payout policies.
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Janaina Muniz, Fernando Galdi and Felipe Storch Damasceno
This study aims to investigate whether there is any influence of the option plan to purchase shares protected from dividends to determine the distribution of dividends in…
Abstract
Purpose
This study aims to investigate whether there is any influence of the option plan to purchase shares protected from dividends to determine the distribution of dividends in Brazilian companies.
Design/methodology/approach
The authors used a Tobit dynamic and regressive regression model because their sample has an index higher than 30% of companies that do not pay dividends. The sample includes companies that pay dividends or not and pay their executives with executive stock option plans and is composed of 1,990 observations from 356 companies from 2010 to 2016.
Findings
The results indicated that the presence of a dividend protection clause has a positive association with the distribution of dividends. The authors sought to clarify that companies with a stock option plan protected by the distribution of dividends face fewer restrictions on the distribution of dividends. The authors found that most companies still use only stock options to benefit middle-ranking positions and fit the plan in their remuneration policy. The monitoring of these plans lasts an average of seven years, and specific acquisition conditions are not established with their beneficiaries, who must remain in the company and observe performance metrics.
Originality/value
This study is relevant because the relationship between dividends and stock options has not yet been analyzed in Brazil, especially concerning a dividend-protected option plan, which is a relatively recent modality, even unknown to some companies.
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Steven B. Caudill, Carl D. Hudson, Beverly B. Marshall and Anastasia Roumantzi
This paper aims to extend the work by Vafeas and Lie and Lie by developing an empirical model of choice among four alternative mechanisms for distributing cash from corporations…
Abstract
Purpose
This paper aims to extend the work by Vafeas and Lie and Lie by developing an empirical model of choice among four alternative mechanisms for distributing cash from corporations to shareholders: a fixed‐price self‐tender offer, a Dutch auction self‐tender offer, an open market share repurchase, and a special dividend.
Design/methodology/approach
A multinomial logit (MNL) model adapted for choice‐based sampling is used to examine the factors that influence a firm's choice among the four methods.
Findings
Firms with a high degree of heterogeneity in shareholder valuations tend to select an open market repurchase, while firms with low levels of heterogeneity choose a special dividend. Firms already paying high dividends are more likely to issue a special dividend than institute an open market repurchase. A firm with poor stock performance prior to the announcement is more likely to choose a fixed‐price self‐tender offer or open market share repurchase. On the other hand, firms are more likely to follow strong performance with a special dividend. Contrary to Persons' model, it is found that firms facing a takeover threat are more likely to choose a fixed‐price tender offer than a Dutch auction.
Practical implications
It is shown that the ownership structure, current payout level; the size of the distribution, and the degree of stock undervaluation are among the most important determinants of a firm's choice among alternative payout methods.
Originality/value
This study adds to the existing literature by developing the first empirical model of choice among all four one‐time (or infrequent) corporate cash disbursement methods. It is also the first to adjust the MNL estimates for the choice‐based sampling method used to collect the data.
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H. Kent Baker and Sujata Kapoor
The purpose of this paper is to investigate the opinions of managers of Indian firms on stock splits and bonus shares (stock dividends) and relate them to explanations for stock…
Abstract
Purpose
The purpose of this paper is to investigate the opinions of managers of Indian firms on stock splits and bonus shares (stock dividends) and relate them to explanations for stock distributions identified in the prior literature.
Design/methodology/approach
The authors use descriptive statistics from a mail survey to the company secretaries of 500 firms listed on the National Stock Exchange of India to elicit their responses about statements involving stock splits and bonus shares.
Findings
The survey evidence shows that among the competing motives for stock splits, the liquidity hypothesis receives the highest level of support followed by the attention-getting variant of the signaling hypothesis, signaling, and the preferred trading range hypotheses. Regarding bonus shares, respondents express strong support for the retained earnings, liquidity, and signaling hypotheses but lesser support for the cash substitution and preferred trading range hypotheses.
Research limitations/implications
The survey evidence provides new insights into the stated motivations for stock distributions, especially bonus shares, among Indian firms but the ability to generalize the results is tempered by the relatively small number of respondents. This limits the ability to test for statistically significant differences between the various competing hypotheses. Hence, the results are suggestive rather than definitive.
Practical implications
The survey evidence suggests that no single explanation dominates all others for issuing stock splits or bonus shares in India. Thus, managers have multiple reasons for engaging in stock distributions.
Originality/value
Few studies use survey methodology to examine Indian dividend policy. Given the dearth of survey evidence on stock distributions among Indian firms, this study not only updates the limited evidence on stock splits but also provides the first survey evidence about managerial views on bonus shares.
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Ming-Hui Wang, Mei-Chu Ke, Feng-Yu Lin and Yen-Sheng Huang
The purpose of this paper is to examine the dividend policy for firms listed on the Taiwan Stock Exchange. The results are consistent with the prediction of the catering theory in…
Abstract
Purpose
The purpose of this paper is to examine the dividend policy for firms listed on the Taiwan Stock Exchange. The results are consistent with the prediction of the catering theory in that managers choose a dividend policy to cater to the demand of investors.
Design/methodology/approach
Logistic regressions are used to test the catering theory hypothesis.
Findings
The results find that the firms distribute more stock dividends than other types of dividends when the dividend premium (DP) for stock dividends is positive. In contrast, firms shift from stock dividends to other types of dividends such as mixed dividends and cash dividends when the DP for stock dividends is negative.
Originality/value
The marginal contribution of this paper is that the firms change their dividend policy via DP to cater to the demand of investors.
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Jyoti Dua and Anil Kumar Sharma
The mounting focus on environmental, social and governance (ESG) factors in business has sparked substantial curiosity in understanding the nexus between ESG and the companies’…
Abstract
Purpose
The mounting focus on environmental, social and governance (ESG) factors in business has sparked substantial curiosity in understanding the nexus between ESG and the companies’ strategic decisions. This study aims to investigate the influence of firms’ ESG disclosure scores on their dividend payout. Furthermore, it examines the nuanced dynamics of this relationship by exploring the moderating role of the country’s investor protection regulations and regulatory enforcement.
Design/methodology/approach
This study uses pooled ordinary least square regression with year, industry and country effects. It analyzes a balanced panel data set of 192 non-financial firms drawn from the primary equity indices of BRICS nations. This study examined the data of six years spanning 2015–2020.
Findings
The findings discover a significantly positive relationship between ESG scores and dividend payout ratio, conveying that firms with higher ESG scores allocate more of their profits as dividends. Furthermore, the finding reveals that country-level robust investor protection and effective regulatory enforcement mechanisms undermine the positive association between ESG ratings and payouts of dividends, suggesting that the ESG disclosure of firms operating in a setting characterized by enhanced investor safeguards and stricter regulatory oversight will exert less influence on their dividend decisions.
Originality/value
To the best of the authors’ knowledge, this is the first study to concentrate on the ESG–dividend nexus in the BRICS countries. Furthermore, this study used each country’s investor protection index and regulatory enforcement scores to comprehend the influence of country-level legal frameworks in shaping the relationship between ESG and dividend decisions, thus adding value to the existing literature on corporate sustainability.
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