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This study explores whether a firm's environmental and social (E&S) transparency affects corporate payout policies having two forms of dividend payout and stock repurchase payout.

Focusing on a large sample of S&P 500 firms, and utilizing Tobit estimators, the author examines whether a firm's environmental transparency and social transparency affect the levels of each dividend payout and stock repurchase payout. Transparency reflects comprehensive scores compiled by Bloomberg, capturing both the quantity (in terms of the number of data points) and the quality (with respect to objective and industry-relevant data points) of verified E&S information attributed to a firm's E&S practices.

The findings demonstrate that transparency, both environmental and social, relates to higher corporate payouts (i.e. higher dividend payout and higher stock repurchase payout). These positive relationships are magnified for firms suffering from high information asymmetry, low financial reporting quality and for those with weak governance. Moreover, the author finds that dividend payout is more stable in high E&S transparent firms than in low E&S transparent firms. The study findings continue to hold after a battery of robustness and sensitivity checks such as alternative measures, specifications, estimators, use of the instrumental variable regression approach and mitigation of omitted variable bias

The study findings suggest that investors' interests (demanding for high corporate payouts) and other stakeholders' interests (demanding for high E&S transparency) are not necessarily in conflict, and investors' demands can be met while maintaining commitment to high E&S transparency. In addition, the study results imply that higher E&S transparency complements higher corporate payouts and signals to the market both a firm's commitment to E&S transparency and its ability to have high corporate payouts. In this line, the study findings clarify the high value of E&S transparency screening in investors' decision-making process as such transparency leads to higher corporate payouts for investors (i.e. facilitating wealth transfer to shareholders). Finally, the study findings are relevant to standard setters and regulators who emphasize the importance of E&S transparency.

By integrating two distinct streams of literature on corporate finance and corporate social responsibility (CSR), the author introduces E&S transparency as a novel nonfinancial driver of corporate payout policies. Finally, the study findings are in line with the notion that firm transparency (reflected in E&S transparency) can be a crucial element in justifying a firm's corporate payout policies and, in an overall view, firm policies.

The purpose of this paper is to develop and validate new robust measures of investors’ preference for the form of regular corporate payout. Then, the paper adds to the empirical evidence on catering theory by examining managers’ catering to such preference.

The authors use the matching method to control for firm characteristics. The authors apply two robustness tests to validate the measures. The authors use the rigorous multivariate analysis.

US investors’ preference for regular dividends vs regular stock repurchases, being different forms of corporate payout, varies over time. Managers cater to investors’ preference for payout form. The findings are consistent with the catering theory of Baker and Wurgler (2004a). The number of firms that pay cash dividends regularly continue to outnumber the ones that purchase their shares regularly.

The study only uses US data. It does not cover other countries.

The measures can be used in several future research endeavors, such as examining investors’ payout-form preferences in other countries (see Booth and Zhou, 2017) and exploring their determinants, the corporate governance characteristics of firms that cater to investors’ preference vs firms that do not, etc.

The study contributes to understanding investors’ preferences and corporate payout behavior which is prerequisite to efficient policy formulation.

The proxies for investors’ payout-form preference control for firm characteristics and are unrelated to investors’ time-varying risk preferences. Also, they are robust to measurement issues. Moreover, the study covers a period of 40 years.

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.

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.

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.

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.

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).

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.

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.

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.

The purpose of this paper is to investigate whether family firms (FFs) differ from non-family firms (NFFs) in their propensity and likelihood of repurchasing shares. It focuses on the effects of voting control and managerial control of family members and economic conditions on repurchasing activity.

This paper employs pooled Tobit and probit models for a sample of 982 US firms for the period 2006 through 2015 and separates the roles of voting control and managerial control on influencing share repurchase decisions.

This paper provides evidence that FFs have a decreased propensity to repurchase shares relative to NFFs over the sample period. In general, the decreased propensity to repurchase shares is driven by the decision whether to repurchase shares and not the percentage of outstanding market value of equity repurchased.

For critics of share repurchases, this paper provides support for existing literature that FFs provide good long-term stewardship to their firms. In general, it demonstrates that FFs are less likely to repurchase shares than NFFs. Investors that have a preference for or against repurchases can use this information to improve their security selection process.

To date, the effects of family voting and managerial control on share repurchases in the USA has not been considered in the finance literature. This paper adds to the literature by providing evidence that family influence generally results in a lower propensity to repurchase shares.

The purpose of this study is to examine factors influencing decisions to repurchase shares on-market in Australia. The present study also examines the role of board size, board independence and chief executive officer duality on the decision to repurchase shares on-market by Australian firms.

This study blends the traditional motivations of share repurchases with the influences of governance. The sample consists of all non-financial firms included in the Australian All Ordinaries Index (AOI) for the period 2004-2010. The repurchase sample consists of 104 repurchases undertaken by 62 firms. A probit panel model is used to analyse the decision to repurchase shares on the market. To account for unobserved heterogeneity, random effects panel models are also used.

Analyses of a sample of non-financial firms included in the AOI for the period 2004-2010 show that size is significantly positively correlated with the decision to repurchase shares, thus supporting the agency cost. Findings also support the undervaluation and signalling hypotheses. Similarly, there is evidence in support of the view that firms repurchase shares to reach their target optimal capital structure. The present study also finds a significant positive association between board independence and the decision to repurchase shares in Australia.

On-market share repurchases help firms to signal their future growth opportunities and resolve agency conflicts. Signals from repurchases also help markets discover the true fundamental values of firms. Governance plays an important role in improving the effectiveness of on-market share repurchases, as independent directors provide both monitoring and discipline which helps to ensure that firms have valid motivations in undertaking share repurchases.

These findings have implications for capital restructuring and governance policies. Principle-based governance frameworks that prevail in countries like Australia work as well as rule-based governance.

This study highlights the complementary roles that financial policies and corporate boards play in corporate governance. Independent boards ensure that firms pursue appropriate financial policies that help resolve agency conflicts and information asymmetry problems.

In this study, I explore the link between workforce downsizing and the predominance of a corporate governance model that espouses a shareholder value maximization principle. Specifically, I examine how top managers’ shareholder value orientation affects the adoption of a downsizing strategy among large, publicly traded corporations in the United States. An analysis of CEOs’ letters to shareholders indicates that firms with CEOs who use language that espouses the shareholder value principle tend to have a higher rate of layoffs, after controlling for various indicators of the firm’s adherence to the shareholder value principle. The finding suggests that corporate governance models, particularly those advocated by powerful organizational elites, have a significant impact on workers by shaping corporate strategies toward the workforce. The key actors in this process were top managers who embraced the new management ideology and implemented corporate strategy to pursue shareholder value maximization.

The existing literature has established the importance of industry concentration in explaining firm performance and information environments. However, little is known about whether and how industry concentration affects investors’ ability to anticipate future earnings. This paper aims to investigate this query by identifying and testing two channels, product market power and intra-industry information transfer, through which industry concentration affects the informativeness of stock returns about future earnings.

The paper measures the informativeness of stock returns about future earnings by the future earnings response coefficient (FERC)). This study estimates the FERC using a firm-level sample from 38 economies.

The authors find that industry concentration significantly enhances investors’ ability to predict future earnings. Further tests show that both product market power and intra-industry information transfer contribute to explaining the positive association between industry concentration and the FERC, with the former playing a more salient role. Finally, the authors show that a country’s effective competition law attenuates the positive impact of industry concentration on the FERC by weakening the economic impact of the two underlying channels.

This study contributes to the growing literature on the price-leading-earnings relation, industry concentration and international corporate governance.

Relying on an international panel data set, the purpose of this paper is to quantify the economic impact of labor unionization on corporate financial performance.

Static panel regression analysis is performed for a firm-level multinational data set to elucidate the postulated empirical relationships between employee unionization and corporate performance. The transmission mechanisms intermediating the studied effects are discussed and operationalized.

The empirical evidence demonstrates that firms with a higher level of employee unionization spend more on wages and labor-related expenses. The concomitant downside of higher resource extraction by unions is a lower rate of net employment creation and a higher possibility of redundancy layoffs.

Overall, the authors demonstrate that by creating a credible threat of employee disobedience manifested through strikes and internal wage disputes, labor unions remain an effective mechanism of increasing employees’ bargaining power. Despite the discovered weak negative associative link between the degree of unionization and corporate financial performance, the authors perceive the overall evidence to be inconclusive on this matter.

The purpose of this paper is to examine the impact of the two diversification strategies on firms' propensity to save cash out of cash flow.

The author examines the quarterly data of Compustat's active and research firms from the first quarter of 1999 to the last quarter of 2005, with a sample size of more than 79,000 firm quarters. A two‐step GMM Instrumental Variable regression of change in cash holdings, on variables that measure the degree of industrial as well as international diversification strategies, is employed to investigate whether each diversification strategy alleviates or exacerbates firm's propensity to save cash out of its cash flows.

Evidence is found that industrial diversification mitigates the propensity of firms to save cash out of their cash flows. When the sample is partitioned into financially constrained and financially non‐constrained firms, industrial diversification reduces propensity of firms to save cash out of cash flows for financially constrained firms but not for financially non‐constrained firms. On the other hand, the results do not indicate any impact of international diversification on the sensitivity of cash to cash flows.

The paper tests, empirically, whether international and industrial diversification strategies affect the propensity of firms to save cash out of their cash flow.