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1 – 10 of over 2000Bobby 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 corporate…
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.
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Muhammad Akram Naseem, Rizwan Ali and Ramiz Ur Rehman
This study aims to investigate the mediating role of corporate social responsibility (CSR) in the link between board independence, board diversity and dividend payouts…
Abstract
Purpose
This study aims to investigate the mediating role of corporate social responsibility (CSR) in the link between board independence, board diversity and dividend payouts underpinning the agency theory perspective. As boards are ultimately responsible for decision-making, it includes CSR, dividend payouts and other strategic decisions.
Design/methodology/approach
Board independence and board diversity (female director, female independent director) are used as explanatory variables, CSR scores as a mediator and dividend payout explained variables. The relevant data were collected from 159 listed firms of the Pakistan Stock Exchange (PSX) from 2013 to 2019, consisting of 1,113 year-firm observations. For empirical estimation, the study used the Tobit regression analysis and Sobel test to check the significance of the mediation to confirm the hypothesis.
Findings
The results confirm that independence and diversity on the board are positively related to dividend payouts. Further, CSR partially mediates the link between independence and diversity on board-dividend payouts, which confirms the argument that firms with involvement in CSR practices are also associated with dividend payouts.
Research limitations/implications
To the best of the authors’ knowledge, this study is novel to address whether CSR mediates the link of the board’s independence and diversity and dividend payouts in Pakistan’s setting. The results of this study have restricted generalizability due to the specific nature of the sample characteristics; future researchers can extend the research scope.
Practical implications
Theoretically practically, the results imply that CSR spending also enhances the distribution to firms' shareholders, thus becoming attractive to investors. This study enriches the literature on board attributes-dividend policy nexus, which strengthens through CSR practices and is relevant to practice in line with sustainable development in an emerging context.
Originality/value
CSR practices are an understudied but significant factor that links stakeholders' beliefs about firms' decision-making strategies, enhancing dividend announcements. In doing so, this study's findings contribute to the literature, regulators, shareholders and investor at various levels.
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This study aims to examine the effect of corporate governance on firms' dividend payout policy in sub‐Saharan Africa. The study also aims to examine how dividend payout influences…
Abstract
Purpose
This study aims to examine the effect of corporate governance on firms' dividend payout policy in sub‐Saharan Africa. The study also aims to examine how dividend payout influences corporate governance.
Design/methodology/approach
Using a sample made up 27 Ghanaian firms, 177 Nigerian firms, 51 Kenyan firms, and 270 South African firms covering the period 1997‐2006, the paper employs a simultaneous panel regression model in its estimation.
Findings
The results show that board composition and board size exhibit significantly positive relationship with dividend payout in Kenya and Ghana, respectively. Institutional ownership positively influences dividend payout among South African and Kenyan firms. In the case of Nigeria, all the corporate governance measures show significantly negative effects on dividend payout. The findings clearly suggest that, with respect to South Africa, Kenya and Ghana, good corporate governance structures lead to high‐dividend payout, probably due to easy access to and low cost of external finance. However, in Nigeria, improving the governance structures may be associated with high‐earnings retention or low‐dividend payment in order to reduce cost of external finance. We found in the case of Ghana that, dividend payout positively affects board composition, suggesting that Ghanaian firms with high‐payout tend to adopt good corporate governance structures in order to ensure protection of shareholder interest. The findings of this study certainly have important policy implications.
Originality/value
This present study contributes to the corporate governance literature by looking at the importance of corporate governance in influencing firms' dividend behaviour in selected African countries.
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Doddy Setiawan, Bandi Bandi, Lian Kee Phua and Irwan Trinugroho
This research aims to examine the effect of ownership structure on dividend policy using the Indonesian context. The most common ownership structure is concentrated in the hand of…
Abstract
Purpose
This research aims to examine the effect of ownership structure on dividend policy using the Indonesian context. The most common ownership structure is concentrated in the hand of family owners except in the UK and USA (La Porta et al., 1998, 2000). Family owners hold more than half of the companies in Indonesia (Carney & Child, 2013; Claessens et al., 2000). Family firms play an important role in Indonesia. Another important characteristic that emerges is the rise of government- and foreign-controlled firms in Indonesia. Thus, this research also divides ownership concentration into family firms, government-controlled and foreign-controlled firms.
Design/methodology/approach
Samples of this research consist of dividend announcements during 2006-2012 in Indonesian Stock Exchange. This research excluded financial data because these have characteristics that are different non-financial sectors’ characteristics. The final sample of this research consists of a 710 firm-year observation.
Findings
The result of this research shows that ownerships have a positive effect on dividend payout. This research divides the sample into family-controlled firms, government-controlled firms (GOEs) and foreign-controlled firms. This research shows that government- and foreign-controlled firms have a positive impact on dividend payout. However, family firms have a negative effect on the dividend payout. Family firms pay lower dividends because they prefer to control it themselves. Family firms earn benefit from those resources, but at the expense of minority shareholders. Thus, family firms engage in expropriation to minority shareholders.
Research limitations/implications
This study focuses on ownership structure of Indonesian listed firm. This study does not analyze the impact of other corporate governance mechanism such as board structure on dividend decisions. The owner of the companies (family, government and foreign firm) has an opportunity to put their member as part of board members. However, this study does not analyze the impact of board structure on dividend decisions.
Originality/value
This study provides evidence that ownership concentration positively affects dividend payout. However, there is a different effect of ownership structure (family-controlled firms, GOEs and foreign-controlled firm). Government- and foreign-controlled have a positive effect; however, family-controlled firm have a negative effect on dividend payout. Therefore, this study provides evidence of the importance of ownership structure on dividend decision.
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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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The purpose of this paper is to investigate whether and how corporate social responsibility (CSR) performance contributes to shape firms’ payout policy. In particular, it examines…
Abstract
Purpose
The purpose of this paper is to investigate whether and how corporate social responsibility (CSR) performance contributes to shape firms’ payout policy. In particular, it examines the influence of CSR performance on payout level and payout channel choice (dividend payment or share repurchases). Additionally, it examines the moderating role of CSR performance in the relationship between dividends and share repurchases.
Design/methodology/approach
Using 397 European companies listed in the STOXX Europe 600 over the period from 2009 to 2014, the authors employ regression analysis to explore the link between CSR performance and payout policy.
Findings
The first result shows that firms with high CSR performance engage more in payout policy. Second, when choosing between paying dividends and repurchasing stocks, firms with high CSR performance tend to prefer share repurchases. Finally, CSR performance plays an important role in determining the relationship between dividends and repurchases. Specifically, dividends and share repurchases seem to be more substitutable among socially responsible firms.
Practical implications
Firms that are able to develop successful CSR strategies can generate tangible benefits for their shareholders in the form of high payout levels. An increase in CSR expenditure does not lead to cut or minimize the cash flow paid out to shareholders. In addition, government and regulators have to oblige or at least encourage socially responsible firms to use executive stock option that are dividend protected, in order to reduce distortions in dividend policy.
Originality/value
This is the first attempt to investigate the association between CSR performance and share repurchase activities.
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James Malm and Srinidhi Kanuri
The purpose of the paper is to examine the relationship between litigation risk and payout policy.
Abstract
Purpose
The purpose of the paper is to examine the relationship between litigation risk and payout policy.
Design/methodology/approach
The authors employ various regression techniques including probit, logit and tobit regression methodologies to study the relationship between litigation risk (contemporaneous measures, litigation dummy) and payout policy (dividend payout likelihood and dividend yield). The authors also conduct several robustness tests.
Findings
The authors find that firms involved in a lawsuit have a lower propensity to distribute dividends to shareholders. In particular, the authors document a negative relationship between litigation risk and payout policy as measured by dividend payout likelihood and dividend yield. The results are robust to a series of robustness tests including using alternate regression specifications, alternate measures of litigation and payout policy, a propensity-score matched sample and using an instrumental variable.
Originality/value
The paper identifies another determinant of payout policy and documents another avenue whereby legal institutions affect corporate payout policy. The link between litigation risk and payout policy is of interest to the business community, financial economists, management and the investing public.
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Chunfang Cao, Fansheng Jia, Xiaowei Zhang and Kam C. Chan
The purpose of this paper is to examine the relation between Buddhism/Taoism and dividend payout decisions among Chinese listed firms during 2003-2013.
Abstract
Purpose
The purpose of this paper is to examine the relation between Buddhism/Taoism and dividend payout decisions among Chinese listed firms during 2003-2013.
Design/methodology/approach
The authors include all Chinese A-share listed stocks in their sample during 2003-2013 and use a multiple regression method to conduct their analyses.
Findings
Their findings suggest that firms in regions with high influence of Buddhism and Taoism lean toward having high dividend payouts. The results are robust to a battery of alternative specifications in dividend payout, religiosity measures, research methods and dividend regulation regimes.
Originality/value
They show that the religions of Buddhism/Taoism play a role in determining dividend payout, complementing other informal institution studies of dividend policy. They complement the literature by providing insights into the impact of Buddhism and Taoism on corporate behaviors beyond immoral or unethical practices. They are able to relate specific doctrinal tenets of Buddhism and Taoism to corporate behavior rather than using only the general moral and ethical guidelines of religiosity.
H. Kent Baker, Bin Chang, Shantanu Dutta and Samir Saadi
The purpose of this paper is to examine cash dividends and stock repurchases in Canada from 1988 to 2006 and their relationship with earnings.
Abstract
Purpose
The purpose of this paper is to examine cash dividends and stock repurchases in Canada from 1988 to 2006 and their relationship with earnings.
Design/methodology/approach
The study uses logistic regressions to examine the likelihood of paying dividends and the timing of repurchases and OLS regressions to examine the level of payout.
Findings
The fraction of dividend‐paying firms declines from 1988 to 2001 and then slightly rebounds until the end of the sample period in 2006. Firm size, profitability, investment opportunities, and catering incentives explain the likelihood of paying dividends. Unlike US firms, Canadian repurchase‐only firms do not become important payers in terms of either the percentage of firms or the level of payout. Dividend‐only firms pay out significant amounts of cash. Firms with both regular dividends and regular repurchases pay out the largest amount. The payout of different groups of payers is determined by their earnings. Testing firms with both regular dividends and regular repurchases reveals that earnings, undervaluation, and availability of cash explains the timing of repurchases but earnings mainly explains the level of repurchases.
Research limitations/implications
Canadian data are unavailable after 2006, which precludes investigating the potential implications of the financial crisis beginning in 2007.
Originality/value
This is the first paper to analyze the evolution of the relationship between payout and earnings in Canada.
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Nalinaksha Bhattacharyya, Amin Mawani and Cameron K.J. Morrill
This paper seeks to present and test a model of the association between dividend payout and executive compensation.
Abstract
Purpose
This paper seeks to present and test a model of the association between dividend payout and executive compensation.
Design/methodology/approach
The authors develop a model based on Bhattacharyya whereby managerial quality is unobservable to shareholders, and therefore first‐best contracts are not possible. In the second‐best world, compensation contracts motivate high quality managers to retain and invest firm earnings, while low quality managers are motivated to distribute income to shareholders. These hypotheses arising from the model are tested on data for Canadian firms' dividend payouts over the period 1993‐1995 using tobit regression analyses.
Findings
Consistent with the predictions of the Bhattacharyya model, the results show that, ceteris paribus, earnings retention (dividend payout) is positively (negatively) associated with executive compensation. These results hold when payout is defined as common dividends plus common share repurchases.
Research limitations/implications
The Canadian data provide only limited information on the components of executive compensation. A more useful test would be possible with more detailed information on, for example, salary, bonus, and benefits.
Originality/value
Several recent papers have documented an association between dividends and executive compensation. This paper presents and tests a model that provides a potential explanation for this link.
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