Search results

The purpose of this paper is to examine the relation between managerial entrenchment and dividend policy for a large number of US industrial firms and examine the relative importance of three competing explanations behind the empirical association between managerial entrenchment and dividend policy, namely, the entrenchment irrelevance hypothesis, the dividend signaling hypothesis, and the optimal entrenchment hypothesis.

Utilizing all firms in the Investor Responsibility Research Center database, Compustat and center for research in security prices (CRSP), this paper investigates firm's propensity to pay dividends based on various logit and Tobit regressions as a function of managerial entrenchment measured by Gompers et al. G index after controlling for known determinants of firms' dividend decisions during the period from 1990 to 2003.

Results show that firms with entrenched managers are more likely to pay dividends. Their high propensity to pay persists over time. A large cash reserve can be used to deter hostile takeovers. Paying dividends reduces cash holdings, leaving the firm more vulnerable to hostile takeovers. In equilibrium, value‐maximizing firms with weak investment opportunities provide managers against takeovers to induce them to distribute cash rather than build a warchest against unwanted takeovers.

The main finding confirms the belief that firms choose a combination of anti‐takeover provisions and dividend policy to maximize shareholder value, evidence in favor of the optimal entrenchment hypothesis.

The purpose of this paper is to examine whether the catering incentives of dividends can influence firms' dividend payment decisions in Thailand.

The sample includes all listed stocks in the Stock Exchange of Thailand during the years 1992‐2009, excluding the firms from financial industries and firms with incomplete information. The catering incentives are measured by dividend premium. The firms' dividend payment decisions are measured by propensity to pay dividends and decision to change dividends.

The findings yield qualitatively consistent with the previous research. After controlling for the effect of the Asian Crisis during 1997‐1999, the result shows that the firm's decision to pay dividend could be affected by the catering incentives. Furthermore, dividend premium will reduce the probability that firms will decide to cut dividend payment from previous years.

The result is limited to the availability of historical data. The Stock Exchange in Thailand has been established for only 35 years. With the lack of availability and completeness of data, the historical data could be gathered for only 18 years.

Investors in Thailand show their preference for dividend incomes. This could be the catering incentive of the firm to decide to pay dividends.

This paper offers the evidence of catering incentives of dividend proposed by Baker and Wurgler in the emerging market. Even though the result is not strong, it can be the evidence supporting the catering theory of dividend, not only in well‐developed markets, but also in emerging markets such as Thailand.

The purpose of this paper is to empirically analyse the propensity to pay dividends and investigate whether the catering theory is valid in an emerging market.

The sample of this study comprises listed firms on the stock market of Turkey, Borsa Istanbul, with 2,438 observations during the period 1999–2015. In line with previous studies in the literature, appropriate control variables are used that may have an impact on Turkish firms' dividend policy. Control variables are examined in the likelihood of paying dividends by using Fama–Macbeth (1973) style cross-sectional logistic regressions. In addition, the linkage between the dividend premium and the propensity to pay is revealed to test the validity of the catering theory.

The findings of the study confirm the tenets of the catering theory for Turkey. When a positive dividend premium exists, that is when investors demand dividend, firms cater them and distribute dividend; on the contrary, when there is no demand, firms prefer not to pay. The effect of catering incentives on the dividend policy provides useful information for managers because the catering theory claims that investors' demand for dividends has an impact on the valuation of firms.

In the aftermath of the 2001 financial crisis, Turkey implemented far-reaching reforms and policy initiatives to improve the efficiency of capital markets and to overcome the obstacles sourcing from their culture and civil law origin. With the adoption of these major economic and structural reforms, as a civil law origin country, Turkey has managed to ameliorate the protection of investors as in common law countries. Ferris et al. (2009) state that the catering theory is applicable to firms in common law countries but not in civil law countries. In addition, prior research is not so extensive regarding the impact of catering incentives on the dividend policy of firms in emerging markets. The results of the analyses suggest that the catering theory is valid for Turkey as a civil law origin emerging country, and to the best of authors' knowledge, this study is the first to test the catering theory in the Turkish capital markets.

The purpose of this study is to examine whether corporate social responsibility (CSR) affects dividend policy (the propensity to pay dividends as well as the dividend payout ratio) and what role family ownership plays in this regard in an emerging market.

The study uses a sample of 1,480 observations from Pakistan for the period 2010–2016 and accounts for Hackman self-selection bias and endogeneity issues using a robust regression analysis. CSR activity is measured by CSR score developed through a content analysis of firms' annual reports.

The study finds that the greater number of CSR activities increases the propensity to pay dividends, but reduces the dividend payout in dividend-paying firms. On the other hand, in family firms, the greater number CSR activities decreases the propensity to pay dividends, but increases the dividend payout in dividend-paying firms. The findings hold for a series of robustness and sensitivity checks, for example, alternative measures, specifications and estimators.

A trade-off between firms' CSR activities and dividend policy needs to be the point of concern for investors, minority shareholders and policy makers. The role of the non-executive and independent directors becomes more important, especially in the family firms where family members sitting on the boards may drive CSR activities in their own interests opportunistically. The potential opportunistic behaviour of family members warrants the need for policy reform initiatives to strengthen the protection of other stakeholders' interests.

The study highlights that family owners' efforts to preserve their socio-emotional wealth in family firms affect the relationship between CSR activities and dividend policy. Further, the relationship between CSR and dividend policy in emerging markets is different from developed markets. This study simultaneously focuses on both the propensity to pay dividends and the amount of dividend payment and documents that the implications of CSR are different for them.

The purpose of this paper is to identify the determinants of dividend policy in an emerging and developing market.

The study employs a quantitative approach using 191 Sri Lankan firms and 1,337 firm-year observations as the sample. The authors apply a Binary Logistic Regression model to uncover the determinants of the propensity to pay dividends, and a Fixed Effect Panel Regression to investigate the determinants of dividend payout.

The authors identify past dividend decision, earnings, investment opportunities, profitability, free cash flow (FCF), corporate governance, state ownership, firm size and industry influence as the key determinants of propensity to pay dividends. In addition past dividends, investment opportunities, profitability and dividend premium are identified as the determinants of dividend payout. Moreover, there is a feedback between dividend yield and profitability in one lag and between dividend yield and dividend premium in two lags, as short-term relationships. Hence, past dividend decision or payout, profitability and investment opportunities are a common set of determinants with implications for both propensity to pay dividends and its payout. The findings support theories of dividends such as signaling, outcome, catering, life cycle, FCF and pecking order.

The findings are important for investors, managers and future research. Investors should focus on the determinants identified by our study when making investment decisions whereas managers should practice the same when formulating appropriate dividend policies for their firms. Future research should rely on propensity to pay dividends and its payout simultaneously to promote a theoretical consensus on the dividend determinant puzzle.

This is the first study that investigates determinants of propensity to pay dividends and dividend payout along with short-term relationships in a single study.

This study examines the impact of board composition and ownership structure variables on dividend payout policy in Saudi Arabian firms. In particular, it aims to determine the effect of board size, independence and meeting frequency, in addition to chief executive officer (CEO) duality, and state, institutional, managerial, family, and foreign ownership on both the propensity to pay dividends and dividend per share for Saudi-listed firms over the period 2016–2019.

The paper captures dividend policy with two measures, propensity to pay dividends and dividend per share, and employs a range of regression methods (logistic, probit, ordinary least squares (OLS) and random effects regressions) along with a two-stage least squares (2SLS) model for robustness to account for heteroscedasticity, serial correlation and endogeneity issues. The data set is a large panel of 280 Saudi-listed firms over the period 2016 to 2019.

The results underline the importance of board composition and the ownership structure in explaining variations in dividend policy across Saudi firms. More specifically, there is a positive relationship between the propensity to pay dividends and board-meeting frequency, institutional ownership, firm profitability and firm age, while the degree of board independence, firm size and leverage exhibit a negative relation. Further, dividend per share is positively related to board meeting frequency, institutional ownership, foreign ownership, firm profitability and age, while it is negatively related to CEO duality, managerial ownership, and firm leverage. There is no evidence that family ownership exerts an impact on dividend payout policy in Saudi firms. The findings of this study support agency, signalling, substitute and outcome theories of dividend policy.

This study offers an important insight into the board characteristic and ownership structure drivers of dividend policy in the context of an emerging market. Moreover, the study has important implications for firms, managers, investors, policymakers, and regulators in Saudi Arabia.

This paper contributes to the existing literature by providing evidence on four board and five ownership characteristic drivers of dividend policy in Saudi Arabia as an emerging stock market, thereby improving on less comprehensive previous studies. The study recommends that investors consider board composition and ownership structure characteristics of firms as key drivers of dividend policy when making stock investment decisions to inform them about the propensity of investee firms to pay dividends and maintain a given dividend policy.

This paper aims to extend and contribute to prior UK research on the association between information asymmetry and dividends propensity. It seeks to investigate the impact of the number of analysts following firms, a proxy for information asymmetry, on dividends propensity.

Using a 282 UK FTSE‐All Share non‐financial/non‐utilities firms with fiscal year ends on 2007, the paper uses a multiple regression model to investigate the association between dividends and analysts following.

The paper finds that after controlling for firm‐specific characteristics, there is a significant negative association between the number of analysts following firms and dividend propensity. The finding suggests that higher coverage of financial analysts for UK firms reduces levels of information asymmetry between managers and shareholders, which results in lower dividend propensity. These findings are consistent with agency theory and pecking order theory, but inconsistent with signalling theory.

The paper contributes to prior research related to the drivers of dividend propensity by being the first UK study to examine the association between dividend propensity and information asymmetry.

This research attempts to examine bank dividend policy in Indonesia by applying the life cycle theory of dividends.

This research used secondary data gotten from two sources: banks’ annual financial statements from 2005 to 2019 and the number of observation samples was 510 from 42 banks. Random Effects Logit Model (RELM) is used to detect the influence of independent variables on Propensity to Pay Dividends (PPD) and Random Effects Tobit Model (RETM) is used to test the influence of independent variables on Dividend Payout Ratio (DPR).

The RELM results show that Retained Earnings to Total Equity (RE/TE), Retained Earnings to Total Asset (RE/TA) and bank age have a positive impact on the propensity to pay dividends (PPD) while bank growth (GRW) has a negative impact. The RETM results reveal that RE/TE, ROA and bank size have a positive impact on the dividend payout ratio (DPR) while GRW has a negative impact. This analysis also discovers that the capital adequacy ratio (CAR) and Non-performing Loans (NPL) is one important factor considered by banks in Indonesia in determining their dividend policy.

This study contributes to enriching literature in finance, especially in the life cycle theory of dividends. Also, it can be a guide to consider by investors before deciding to put their shares in banks in Indonesia.

Research on bank-specific life cycle theory is very difficult to find, especially in the Indonesian context, so this research can enrich the body of knowledge on dividend decisions.

This paper aims to investigate the relation between corporate governance and dividend policy in Sri Lankan firms.

The data set consists of market data using 1,608 firm-year observations from 201 firms listed on the Colombo Stock Exchange and survey-based data from 151 respondents from the same 201 firms. The authors use data triangulation to examine the two approaches.

The analysis of the market data reveals that a significantly positive relation between corporate governance on both the propensity to pay dividends and dividend payout. Survey analysis confirms these findings. Triangulated evidence supports the outcome model of dividends, free cash flow and agency cost theories.

The findings are useful not only for management in developing suitable corporate governance practices and dividend policies for their firms but also for shareholders in evaluating both existing and new investments. Future researchers should investigate the same phenomenon in other contexts using triangulation approaches to confirm their findings.

This study is the first to use governance indices both in terms of survey and market-based data to examine the relation between corporate governance and dividend policy.

The purpose of this paper is to examine the association between company reputation and dividend policy.

In this study, sample of 98,809 firm-year observations from 22 countries covering 2005–2016 were used.

Firm reputation concerns are associated with higher propensities to pay dividends and payout ratios. Further, this positive effect is more pronounced for firms with high free cash flows, high information asymmetry and low institutional monitoring. The results are robust to an instrumental variable approach, propensity score matching and the Heckman two-stage correction approach while addressing endogeneity concerns.

These findings have significant implications for various stakeholders, such as existing and potential investors, managers, policymakers and regulators, by providing insights into the relationship between corporate reputation and firm dividend payout decisions. Corporate reputation is highlighted as crucial for accessing finance, emphasizing the role of national regulators and policymakers in facilitating firms' efforts to improve their reputation. The study highlights the dynamics of corporate reputation and dividend payout, calling for proactive engagement from regulators and policymakers. Crafting policies conducive to reputation-building can enhance firms' financial prospects, indicating the need for strategic interventions at managerial, regulatory and policy levels. Understanding the influence of economic context is crucial for firms to tailor reputation management strategies and optimize funding opportunities in different economic environments.

Overall, results suggest that reputation serves as a disciplining mechanism, where firms will pay dividends to maintain their reputations.