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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.

This paper seeks to examine whether or not divident policy is influenced by the firm's corporate control structure, investigating the relationship between the dynamics of earnings payout and the voting power enjoyed by different types of shareholders. This allows one to test a set of hypotheses derived from agency and pecking order theories.

A large panel of UK firms for the 1990s and is analyzed that the payout policy is significantly related to control concentration. The problem of control measurement is addressed and the use of Banzhaf indices advocated as a relevant measure of voting power in the analysis of corporate policy choices. The traditional framework proposed by Linter is extended and an econometrically sound approach to modeling the dynamics of the total payout suggested. Where most – even recent – studies on payout policy show some methodological flaws, state‐of‐the‐art dynamic panel data estimation procedures are applied.

Expectedly, profitability is a crucial determinant of payout decisions, but the presence of strong block holders or block holder coalitions weakens the relationship between the corporate earnings and the payout dynamics. Block holders appear to realize that an overly generous payout may render the company liquidity constrained, and, consequently, result in suboptimal investment policy.

The results challenge some of the implications of the agency theories of payout, and favor a pecking‐order explanation for the observed patterns. The analysis of payout dynamics reveals also that companies adjust payout policies to changes in earnings only gradually, which is consistent with “dividend smoothing”. In fact, the results suggest a presence of a more general phenomenon of the “total payout smoothing”.

According to one's bet knowledge, this is the first study employing those game theory‐based concepts in the context of corporate payout policies.

The purpose of this paper is to examine cash dividends and stock repurchases in Canada from 1988 to 2006 and their relationship with earnings.

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.

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.

Canadian data are unavailable after 2006, which precludes investigating the potential implications of the financial crisis beginning in 2007.

This is the first paper to analyze the evolution of the relationship between payout and earnings in Canada.

The paper examines how earnings transparency affects dividend payouts for Indian firms. The authors also explore the channels through which earnings transparency affects dividend payouts.

The authors employ panel data estimation with fixed effects to examine the role of earnings transparency on dividend payouts. The authors also use path analysis to explore causation. The paper uses a sample of more than 2000 Indian listed firms, over the period 2001–2016.

The authors report that firms showing grater earning transparency pay more cash dividend. Their results do not support the signaling hypothesis about the dividend. However, these results provide explicit support to the theory that corporate dividend policy is an outcome of information asymmetry. Moreover, the path analysis reveals the effect of earnings transparency on corporate payout through the financial constraint channel. The results are robust to idiosyncratic controls; alternate measures of payout; alternate models; endogeneity concerns; and the alternate channel of returning money to stockholders.

Managers should also examine earnings transparency while formulating an adequate dividend policy for their firms. This study also helps investors to identify dividend-paying stocks.

This study particularly contributes to the literature examining the effect of earnings quality on dividend payouts through its effect on financial constraints. We, therefore, connect two streams of research that contemplate the relation between accounting-based information variables and dividend payouts and the relationship between financial constraints and dividend payouts. Moreover, using path analysis uniquely, the authors provide evidence on the relative importance of both the direct and the indirect link.

Prior studies document increased share repurchase activity after the temporary tax holiday under the American Jobs Creation Act (AJCA) of 2004. Our study examines the moderating effect of financial statement readability on share repurchases in response to a temporary reduction in repatriation tax. Building on prior literature, we argue that firms with excess cash overseas, despite the lack of investment opportunities, produce less readable financial statements to hide bad news. We find that firms with less readable financial statements initiated higher levels of share repurchases after the AJCA. Our results contribute to the existing literature showing (1) firms hold excess cash overseas mainly for tax reasons rather than for nontax reasons such as precautionary motives or empire-building concerns and (2) firms return excess funds to investors rather than squander the funds once the tax cost of repatriation is reduced. Firms that suffer from the overinvestment problem using hard-to-read financial statements to hide the bad news of a lack of investment opportunities are more likely to benefit from the tax cut. Our study provides timely evidence of potential firm response to the 2017 Tax Cut and Jobs Act, which permanently removes the repatriation tax.

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.

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.

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.

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.

This is the first attempt to investigate the association between CSR performance and share repurchase activities.

The purpose of this study is to examine the relationships between chief executive officers (CEOs) with military service and firm dividend and cash holding decisions.

The authors use a sample of Standard and Poor's (S&P) 1500 firms in the USA over a sample period from 1999 to 2017 and a panel data approach, as well as instrumental variable (IV)analysis. The models control for firm characteristics as well as industry and year-fixed effects.

The results show CEOs with military service are associated with higher total payout and less cash. Higher dividends appear to drive the total payout result. When cash holdings are split into pure cash and short-term investments, the reduction in cash holdings is driven by a reduction in pure cash. The findings are more pronounced for powerful CEOs and CEOs with low labor mobility. Military CEOs are also associated with less risk, measured by stock return volatility and return on assets (ROA) volatility.

Overall, the results are consistent with military CEOs implementing conservative policies that reduce firm risk, curtailing the demand for precautionary cash and reducing the necessity to forego dividend payouts.

In practice, it is increasingly common for companies to use NON-COMPETITION covenants in employment contracts that put restrictions on post-employment activities. Making use the variation of legal enforcement of NON-COMPETITION agreements in different states (NON-COMPETITION index) across the U.S., this chapter empirically examines whether and to what extent labor market concern will affect firm payout policy when managers are bound to their firms by NON-COMPETITION agreements. We find that the likelihood for a firm to pay DIVIDEND or conduct repurchasing is positively related to NON-COMPETITION index. We directly measure PAYOUT RATIO and find a significant positive relation between firm PAYOUT RATIO and NON-COMPETITION index. Our results indicate that managers with increased stability and reduced job opportunity in the external labor market are more likely use cash payout as a pre-commitment device and send a signal that they will not entrench themselves.

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.

In view of the fact that claim payouts account for about 70 per cent of annual direct costs in non-life insurance companies and that claims-handling staff sums up to 10-20 per cent of all employees, an optimal claims management environment is of strategic importance. The purpose of this paper is twofold, i.e. on the one hand, the authors introduce a standardized claims management process model and, on the other hand, they apply process benchmarks to various operational parameters.

The proposed claims management process landscape comprises current industry standards for claims handling from a theoretical perspective, supported by practice insights from the industry. Our model aims to reflect the most important claims processing activities. The claims-handling work flow is structured into five core steps, namely, notification, registration, coverage audit, settlement and closing of the claim. For these core steps, the authors differentiate between three claim complexity categories and their associated back-office levels. In the second part of the paper, the authors assess the industry’s claims-handling efficiency. The authors benchmark industry processes with reference to detailed claims management data from 11 insurers in Germany and Switzerland.

The benchmarks are based on the previously defined claims management model and are applied separately to the three retail business lines of car, property and liability insurance. We measure claim process times (cycle times) as well as claim quantities and average claim payouts at different levels. Overall, within each business line, more than 30 data points are gathered from each respondent insurer. This allows us to compare the process performance of different insurance companies and to describe significant differences in their process patterns. Furthermore, principal findings are derived from descriptive statistics as well as ad hoc data analyses.

The paper seeks to contribute to the discussion of how different insurance companies perform in claims management and to define best practice. Our findings are relevant to academics and practitioners alike.