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1 – 10 of over 3000
Article
Publication date: 1 March 2016

Manon Deslandes, Anne Fortin and Suzanne Landry

The objective of this study is to explain family firm payout decisions based on socioemotional wealth (SEW) considerations.

Abstract

Purpose

The objective of this study is to explain family firm payout decisions based on socioemotional wealth (SEW) considerations.

Design/methodology/approach

A sample of publicly listed Canadian companies is examined for the period from 2003 to 2008. Distinguishing family firms from nonfamily firms, a Probit regression is used to analyze the likelihood of making a payout. For payout firms, regressions are used to analyze the relationship between payout level (dividends and share repurchases) and payout mix and family firms.

Findings

Results indicate that family firms are more likely to make a payout than nonfamily firms. Among payout firms, the level of payout among payout firms is lower for family firms than for nonfamily firms and their portion of payout in the form of dividends is higher. Lone founder family firms have a lower likelihood of making payouts than other family firms. However, among payout firms, they pay out more than other family firms and have a smaller percentage of their total payout in dividends than other family firms.

Research limitations/implications

Results are impacted by the definition of what constitutes a family firm. Family ownership was used as a proxy for the underlying SEW considerations. Future research could involve interviews with family firm representatives to investigate the relative importance of SEW considerations in their payout decisions.

Originality/value

In providing an alternative theoretical framing of family firms’ payout policies, the study suggests that payout differences between family and nonfamily firms may be driven in part by SEW considerations.

Details

Journal of Family Business Management, vol. 6 no. 1
Type: Research Article
ISSN: 2043-6238

Article
Publication date: 2 November 2015

Edward C. Hoang and Indrit Hoxha

– The purpose of this article is to empirically explore the sensitivity of payouts to cash flows and the other financing decisions, such as debt and investment, of firms.

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Abstract

Purpose

The purpose of this article is to empirically explore the sensitivity of payouts to cash flows and the other financing decisions, such as debt and investment, of firms.

Design/methodology/approach

Using panel regressions based on COMPUSTAT data for 7,544 public firms during the period 1973–2013, we estimate the sensitivity of total payouts. Specifically, following the theory presented in Lambrecht and Myers (2012), we test the interdependent financing decisions of the firm. First, we compute total payout as the sum of cash dividends and net stock repurchases; second, we examine the sensitivity of total payouts to changes in the firm’s net income, debt and investment. Furthermore, we present several tests to demonstrate the robustness of our results.

Findings

We suggest evidence in support of the theory in Lambrecht and Myers (2012) showing that there is a negative relationship between total payouts and investment. Furthermore, we find that total payouts are positively associated with net income and debt of the firm.

Originality/value

Previous research has shown how cash flows affect different financing decisions, but it is not clear how total payouts are sensitive to other financing decisions. The focus of this paper is the response of total payouts to investment policy, debt financing policy and changes in cash flows.

Details

Journal of Financial Economic Policy, vol. 7 no. 4
Type: Research Article
ISSN: 1757-6385

Keywords

Book part
Publication date: 1 November 2018

Bobby Alexander, Stephen P. Ferris and Sanjiv Sabherwal

This study examines whether dividend payout, an internal corporate governance mechanism, is a substitute for or an outcome of product market competition, an external…

Abstract

This study examines whether dividend payout, an internal corporate governance mechanism, is a substitute for or an outcome of product market competition, an external corporate governance mechanism. The sample includes firms in six of the world’s most prominent economies. We find that firms in more competitive industries pay less in the way of dividends to their shareholders, which is consistent with the notion that dividends and competition are substitutes. We also determine that the above negative relationship is weaker in countries with stronger regulation protecting minority shareholders against corporate self-dealing. Furthermore, the relationship has attenuated following the passage of the Sarbanes-Oxley Act that increased regulation and enhanced governance standards. Collectively, our findings provide consistent evidence across countries that the two corporate governance mechanisms examined in the study are substitutes, and greater regulation weakens the substitution effect. Our empirical findings are robust to alternative measures of dividend payout, industry definition, and shareholder protection.

Details

International Corporate Governance and Regulation
Type: Book
ISBN: 978-1-78756-536-4

Keywords

Book part
Publication date: 4 September 2015

Timothy G. Coville and Gary Kleinman

The manner in which publicly traded companies’ management teams handle their firm’s free cash flows (FCF) has been an issue for many decades, because it is difficult to…

Abstract

The manner in which publicly traded companies’ management teams handle their firm’s free cash flows (FCF) has been an issue for many decades, because it is difficult to determine whether these management teams work for their own benefit or for that of their shareholders. Recent financial scandals have heightened mistrust of management. This mistrust, in turn, may have increased the pressure to reduce the portion of FCF left under management’s control. Boards of directors control dividend payout decisions, thus determining the portion of FCF available to corporate management. This paper examines whether the 2002 legal response to corporate financial reporting scandals, which came in the form of many new initiatives and requirements imposed by the Sarbanes–Oxley Act of 2002 (SOX) on all publicly traded firms, was relevant to dividend payouts. This question is investigated by noting that the impact of these new requirements differed among firms. Some firms had already introduced the use of independent directors and fully independent committees prior to SOX making them compulsory in 2002. This paper examines whether these “pre-adopters” experienced less change in their dividend payout policies than those firms that were forced to change the composition of their board and committees.

This investigation examines the effect on dividend payouts for listed firms attributable to the SOX and concurrent changes in stock exchange regulations that compelled increased use of independent directors and fully independent committees. To study the impact of SOX and the associated, required, changes in the composition of boards of directors for many firms, the difference-in-differences methodology is employed to overcome the endogeneity concerns that have consistently challenged prior governance studies. This was accomplished by examining the effects on dividend payouts associated with the exogenously forced addition of independent directors to the boards of publicly listed firms. The results reveal that there is a significant positive relationship between firms that were compelled by law to change their boards and increases in average changes in dividend payouts and percentage changes in dividends paid, when compared to firms that had pre-adopted the Sarbanes–Oxley corporate board composition requirements. A further exploratory analysis showed that the same significant positive relationship is detected for increases in average changes in total dollars distributed, where stock repurchase dollars are combined with dividend payouts. These findings imply that these board composition changes led to decisions that increased dividend payouts in percentage terms, as well as dividend payouts and total dollars distributed in aggregate dollar amount terms.

Details

Sustainability and Governance
Type: Book
ISBN: 978-1-78441-654-6

Keywords

Open Access
Article
Publication date: 20 June 2022

Eun Jung Lee, Sungmin Kim and Yongwon Jang

This paper examines whether long-term foreign investors may force firms to use a costly dividend to mitigate inefficient managerial behavior. The authors also hypothesize…

Abstract

This paper examines whether long-term foreign investors may force firms to use a costly dividend to mitigate inefficient managerial behavior. The authors also hypothesize that the relation between foreign investment horizons and payout policy depends upon the extent of the corporate governance. The authors find that firms held by long-term foreign investors make dividend more often in the subsequent years. The authors also find that foreign investors with long-term investments do not cause firms to pay dividends when firms have strong corporate governance. It suggests that long-term foreign investors serve as a substitute for strong corporate governance with respect to controlling agency conflicts.

Details

Journal of Derivatives and Quantitative Studies: 선물연구, vol. 30 no. 3
Type: Research Article
ISSN: 1229-988X

Keywords

Article
Publication date: 13 May 2022

Fatima N. Ali Taher and Mohammad Al-Shboul

This paper examines the impact of dividend policy on stock market liquidity, and whether the dividend payouts has an asymmetric effect on stock liquidity.

Abstract

Purpose

This paper examines the impact of dividend policy on stock market liquidity, and whether the dividend payouts has an asymmetric effect on stock liquidity.

Design/methodology/approach

A multivariate panel-data regression analysis is conducted for a sample of the largest 411 nonfinancial US firms. Three main hypothesis are tested: (1) whether dividend payouts impact affect stock liquidity, (2) whether low and high dividend payments can asymmetrically effect on stock liquidity and (3) whether the presence of the GFC has an impact the relationship between dividend payments and stock liquidity.

Findings

The study finds that dividend policy is adversely associated with stock liquidity. This supports the prediction of the liquidity-dividend hypothesis. The authors also report that stock liquidity asymmetrically responds to changes in dividend payouts, confirming the prediction of the dividend-signaling approach. More specifically, higher dividend payments decrease stock liquidity by a lower magnitude than the increase in stock liquidity resulting from lower dividend payments. Finally, the presence of the GFC weakened the relationship between dividend payments and stock liquidity.

Research limitations/implications

The paper can help in performing future research by using different dataset covering the COVID-19 crisis.

Practical implications

The paper allows market participants to better understand the impact of dividend policy and its asymmetric effects on stock liquidity. The authors’ analyses can direct investors and regulators to adopt new supervisory devices to create an appropriate level of dividend payouts that helps to effectively support the level of stock liquidity.

Social implications

The paper intends to support the business community and to make strong contributions to the economic development and the welfare of the community.

Originality/value

The originality comes from its new evidence as it can help in assessing the importance of dividend policy and its asymmetric impact on stock liquidity in the full sample and during the GFC. The paper is helpful in performing future analyses using a new sample period for another set of data as well as accounting for COVID-19 pandemic crisis.

Details

Journal of Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 17 March 2022

Mohammad Hendijani Zadeh

This study aims to explore whether an auditee’s audit quality influences its payout policies (i.e. each form of dividend payouts and stock repurchase payouts).

Abstract

Purpose

This study aims to explore whether an auditee’s audit quality influences its payout policies (i.e. each form of dividend payouts and stock repurchase payouts).

Design/methodology/approach

Based on a panel data of US public firms, from 2004 to 2018, and Tobit estimators, this study aims to examine whether auditees’ audit quality is related to their payouts and under which circumstances (from the standpoints of auditees’ information asymmetry, refinancing risk, corporate governance and financial constraints) the aforesaid associations are more pronounced.

Findings

The findings of this study imply that auditees’ audit quality is positively related to auditees’ payouts. Further examination suggests that this positive relationship is stronger for auditees with higher information asymmetry, lower financial constraints and refinancing risk and for those with weaker governance. Finally, this study documents that dividend payouts are more stable for auditees with high-quality audits than those with low-quality audits. The results support the view that auditees’ transparency (reflected in high-quality audits) could be a crucial driver and rationale for their payout policies and, ultimately, overall policies.

Originality/value

By combining two different research lines of audit quality and corporate payout policies, this paper adds to both literature, as it is a novel one to document the contributing function and impact of audit quality on auditee’s payout policies (tangible financial decisions and policies). The findings are significant considering that it documents high-quality audits affecting the auditees besides their financial reporting quality. This study also shows the moderating roles of the auditee’s information asymmetry, rollover risk, financial constraints and corporate governance in the relation between audit quality and an auditee’s payout decisions. Furthermore, the findings can help shareholders (aiding them in determining companies with high payout policies), regulators and policymakers who emphasize audit quality. The results indicate that policymakers’ and standard setters’ efforts fostering high-quality audits should be in conjunction with firm payout standards.

Details

Managerial Auditing Journal, vol. 37 no. 5
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 5 May 2021

Avinash Jawade

This study aims to analyze the influence of firm characteristics in dividend payout in a concentrated ownership setting.

Abstract

Purpose

This study aims to analyze the influence of firm characteristics in dividend payout in a concentrated ownership setting.

Design/methodology/approach

This study is probably the first to use the lasso technique for model selection and error prediction in the study of dividend payout in India. The lasso method comprises subsampling the available data set and performing reiterative regressions on those samples to generate the model with the best fit. This study incorporates four different ways of performing lasso treatment to get the best fit among them.

Findings

This study analyzes the influence of firm characteristics on dividend payout in the Indian context and asserts that firms with growth potential and earnings volatility do not hesitate to cut dividends. This study does not find evidence for signaling, agency cost and life cycle theories in a concentrated ownership setting. Earnings is the single most important factor to have a positive influence on dividend, while excessively leveraged firms are restrictive of dividend payout. Taxation has a prominent role in altering the way firms pay dividend.

Research limitations/implications

The recent changes in buyback taxation offer another opportunity to test the reactive behavior of firms. Also, given the disregard for traditional motivations, further research needs to be done to determine if dividend adjustments (on the lower side) help enhance firm value or not.

Practical implications

This study may help investors view dividends in a proper perspective. Firms give importance to investments over dividends and thus investors need not dwell on dividend changes if firms fulfill their growth potential.

Social implications

It lends perspective to investors about dividend changes and its importance.

Originality/value

The methodology used for analysis is absolutely original in the literature pertaining to dividend policy in the Indian context. The literature is abundant with theories advocating or opposing the eminence of dividend payout; however, this study takes a holistic view of all influential dividend determinants in literature to understand dividend payout.

Details

Journal of Indian Business Research, vol. 13 no. 2
Type: Research Article
ISSN: 1755-4195

Keywords

Article
Publication date: 13 May 2021

Ravichandran Subramaniam and Mahenthiran Sakthi

To examine the board of directors’ performance and if higher performance helps protect minority shareholders in an emerging capital market. Additionally, we determine if…

Abstract

Purpose

To examine the board of directors’ performance and if higher performance helps protect minority shareholders in an emerging capital market. Additionally, we determine if the different types of company ownership moderate the level of protection to minority shareholders.

Design/methodology/approach

The study develops a measure of board performance with their compensation. And it tests its association with the dividend payout decision of 300 of the largest Malaysian public listed companies (referred to as PLCs) over the period 2008 to 2014.

Findings

The results find that higher board productivity in terms of return on capital employed is associated with higher dividend payout. Additionally, the study finds that the board performance measure interacts with race, ethnicity and gender of the board of directors and CEO duality to affect the dividend payout decision of Malaysian PLCs.

Research limitations/implications

It is a single-country study of large Malaysian PLCs. And it uses only the governance mechanisms that have been shown in emerging capital markets to have the most significant effect on affecting the relationship between board performance and dividend payout.

Practical implications

The findings show the importance of inclusivity and diversity in governing State-controlled firms in an emerging capital market.

Originality/value

The findings suggest improving corporate boards’ performance, protecting minority shareholders and contributing to the corporate governance literature. Notably, the study highlights boardroom diversity’s importance to enhance the boards of State-controlled firms’ performance.

Details

International Journal of Managerial Finance, vol. 18 no. 2
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 7 May 2021

Md. Bokhtiar Hasan, Abu N. M. Wahid, Md. Ruhul Amin and Md. Delowar Hossain

The purpose of this study is to examine the impact of ownership structure such as family, government, institutional, foreign and public on dividend payouts as a…

Abstract

Purpose

The purpose of this study is to examine the impact of ownership structure such as family, government, institutional, foreign and public on dividend payouts as a representative of dividend policy of nonfinancial firms in Bangladesh.

Design/methodology/approach

This study employs a dynamic panel data model, namely, differenced generalized method of moments (GMM), which follows a two-step process. The study uses annual data of a sample of 159 nonfinancial firms of Dhaka Stock Exchange for the period 2008–2017, which constitutes a panel data of 1,590 firm-year observations.

Findings

This study’s findings reveal that family and public ownerships have a significant and positive effect on dividend payouts, while government and institutional ownerships have a significant but negative effect. This study additionally incorporates some very important controlled variables and finds that except for size, all the selected controlled variables, i.e. lagged-one of dividend payout, returns on assets, debts to assets, price-earnings (PE) ratio, age and financial crisis have a significant effect on the dividend payouts. However, the findings support several dividend-related theories or hypotheses, i.e. agency cost theory, dividend stability theory and reputation hypothesis.

Research limitations/implications

This study could consider some other aspects of corporate governance, as well as other emerging markets and financial institutions to perceive whether the results differ. Also, investigation could be carried out on conventional and Islamic firms individually to observe if the findings are different. However, the researchers are suggested to incorporate these issues in their future studies.

Practical implications

This study offers an important insight into the relationship dynamics between dividend payouts and ownership structure in the context of an emerging market like Bangladesh. Moreover, it enhances the understanding of the ties of dividend payouts with the firm-specific factors as well as the financial crisis. The findings of the present study have also important implications for managers, policymakers and researchers, who are in quest of directions on the dividend policy of publicly listed nonfinancial firms.

Originality/value

Most of the previous studies consider one or two types of ownership to examine the impacts on dividend payouts, while this study uses five types of ownership accompanied by a different data set. Moreover, to the authors’ knowledge, no study in Bangladesh has yet addressed this issue in such a comprehensive manner as theirs.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

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