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Xinlei Shelly Zhao - One of the best experts on this subject based on the ideXlab platform.
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asymmetric information and Dividend Policy
Financial Management, 2008Co-Authors: Xinlei Shelly ZhaoAbstract:We examine how informational asymmetries affect firms' Dividend policies. We find that firms that are more subject to information asymmetry are less likely to pay, initiate, or increase Dividends, and disburse smaller amounts. We show that our main results are not driven by our sample and that our results persist after accounting for the changing composition of payout over the sample period, the increasing importance of institutional shareholdings, and catering incentives. We conclude that there is a negative relation between asymmetric information and Dividend Policy. Our results do not support the signaling theory of Dividends.
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asymmetric information and Dividend Policy
Financial Management, 2008Co-Authors: Xinlei Shelly ZhaoAbstract:We examine how informational asymmetries affect firms’ Dividend policies. We find that firms that are more subject to information asymmetry are less likely to pay, initiate, or increase Dividends, and disburse smaller amounts. We show that our main results are not driven by our sample and that our results persist after accounting for the changing composition of payout over the sample period, the increasing importance of institutional shareholdings, and catering incentives. We conclude that there is a negative relation between asymmetric information and Dividend Policy. Our results do not support the signaling theory of Dividends. Inthis paper, we study how informational asymmetries affect firms’ Dividend policies by examining the relation between a firm’s Dividend Policy and the quality of its information environment. Dividends have long puzzled financial economists. Miller and Modigliani (1961) prove that Dividend Policy is irrelevant to share value in a perfect and efficient capital market. However, the observation that share prices typically rise when firms increase Dividend payments suggests that, on the contrary, Dividends do matter after all. Various studies have proposed various explanations for firms’ Dividend behavior (see Allen and Michaely, 2003, for a comprehensive review of the literature). Among them, the Dividend signaling theory is one of the dominant explanations. Under the signaling models of Bhattacharya (1979), John and Williams (1985), and Miller and Rock (1985), managers know more about the firm’s true worth than do its investors and use Dividends to convey information to the market. Thus, these models suggest a positive relation between information asymmetry and Dividend Policy. Other studies have developed tests to examine the Dividend signaling models. However, our study may be the first to specifically examine the testable implications of the signaling models in the context of the relation between information asymmetry and firms’ Dividend policies. To conduct our research, we ask the following questions: Are corporate Dividend policies affected by the degree of information asymmetry that firms face? Is the relation consistent with the signaling view of asymmetric information? Given that information asymmetry is a
Michael Theobald - One of the best experts on this subject based on the ideXlab platform.
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insider ownership and Dividend Policy in an imputation tax environment
Journal of Corporate Finance, 2017Co-Authors: Balasingham Balachandran, Arifur Khan, Paul R Mather, Michael TheobaldAbstract:Abstract Firms are more likely to pay Dividends with higher payout ratios in an imputation environment. The effects of profitability and earned/contributed capital mix on the decision to pay Dividends and Dividend payout are weaker for firms following imputation tax system than traditional tax system. Insider ownership is positively related to the decision to pay Dividends and Dividend payout and this effect does not vary between traditional and imputation tax systems. Firms with higher foreign institutional ownership are less likely to pay Dividends and have lower payout ratios. The study demonstrates the significance of the imputation tax system upon Dividend Policy.
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insider ownership and Dividend Policy in an imputation tax environment
Social Science Research Network, 2017Co-Authors: Balasingham Balachandran, Arifur Khan, Paul R Mather, Michael TheobaldAbstract:Firms are more likely to pay Dividends with higher payout ratios in an imputation environment. Insider ownership is positively related to the decision to pay Dividends and Dividend payout irrespective of imputation credits available. Firms with higher foreign institutional ownership are less likely to pay Dividends. The impact of profitability and earned/contributed capital mix on the decision to pay Dividends is stronger for firms following a traditional tax system, while the impact on profitability on Dividend payout is stronger for firms within an imputation tax system. The study demonstrates the significance of the imputation tax system upon Dividend Policy.
Balasingham Balachandran - One of the best experts on this subject based on the ideXlab platform.
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insider ownership and Dividend Policy in an imputation tax environment
Journal of Corporate Finance, 2017Co-Authors: Balasingham Balachandran, Arifur Khan, Paul R Mather, Michael TheobaldAbstract:Abstract Firms are more likely to pay Dividends with higher payout ratios in an imputation environment. The effects of profitability and earned/contributed capital mix on the decision to pay Dividends and Dividend payout are weaker for firms following imputation tax system than traditional tax system. Insider ownership is positively related to the decision to pay Dividends and Dividend payout and this effect does not vary between traditional and imputation tax systems. Firms with higher foreign institutional ownership are less likely to pay Dividends and have lower payout ratios. The study demonstrates the significance of the imputation tax system upon Dividend Policy.
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insider ownership and Dividend Policy in an imputation tax environment
Social Science Research Network, 2017Co-Authors: Balasingham Balachandran, Arifur Khan, Paul R Mather, Michael TheobaldAbstract:Firms are more likely to pay Dividends with higher payout ratios in an imputation environment. Insider ownership is positively related to the decision to pay Dividends and Dividend payout irrespective of imputation credits available. Firms with higher foreign institutional ownership are less likely to pay Dividends. The impact of profitability and earned/contributed capital mix on the decision to pay Dividends is stronger for firms following a traditional tax system, while the impact on profitability on Dividend payout is stronger for firms within an imputation tax system. The study demonstrates the significance of the imputation tax system upon Dividend Policy.
Thomas L Steiner - One of the best experts on this subject based on the ideXlab platform.
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managerial ownership and agency conflicts a nonlinear simultaneous equation analysis of managerial ownership risk taking debt Policy and Dividend Policy
The Financial Review, 1999Co-Authors: Carl R Chen, Thomas L SteinerAbstract:This paper uses a nonlinear simultaneous equation methodology to examine how managerial ownership relates to risk taking, debt Policy, and Dividend Policy. The results have implications for our understanding of agency costs. We find risk to be a significant and positive determinant of the level of managerial ownership while managerial ownership is also a significant and positive determinant of the level of risk. The result supports the argument that managerial ownership helps to resolve the agency conflicts between external stockholders and managers but at the expense of exacerbating the agency conflict between stockholders and bondholders. We further observe evidence of substitution-monitoring effects between managerial ownership and debt Policy, between managerial ownership and Dividend Policy, and between managerial ownership and institutional ownership.
Erhan Kilincarslan - One of the best experts on this subject based on the ideXlab platform.
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institutional investment horizon and Dividend Policy an empirical study of uk firms
Finance Research Letters, 2017Co-Authors: Erhan Kilincarslan, Ozgur OzdemirAbstract:Abstract This paper investigates the effect of the institutional investment horizon on Dividend Policy. Using a panel dataset of non-financial UK firms over the period 2000‒2010, we measure institutional investors’ investment horizons by the churn rate of their overall stock positions in a firm. We find that there is a significantly negative relationship between the churn rate and Dividend payments, and this negative relation is robust to the usage of different Dividend Policy proxies, substitute methodologies and alternative churn rate measures. Thus, our findings suggest that institutions with shorter term investment horizons (with higher churn rates) have a negative impact on Dividends, whereas longer term institutional investors (with lower churn rates) have a positive one. Overall, our evidence is consistent with the notion that long-horizon institutions are more concerned with monitoring, compared to short-horizon institutions, and prefer higher Dividends to increase Dividend-induced capital market monitoring in order to lower the agency costs of managerial discretion. In addition, this positive influence may also reflect the preferences of tax-neutral long-horizon institutions for Dividend income due to their liquidity needs, as well as the common institutional charter and prudent-man rule restrictions.
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the effect of ownership structure on Dividend Policy evidence from turkey
Corporate Governance, 2016Co-Authors: Basil Alnajjar, Erhan KilincarslanAbstract:Purpose This paper aims to investigate the impact of ownership structure on Dividend Policy of listed firms in Turkey. Particularly, it attempts to uncover the effects of family involvement (through ownership and board representation), non-family blockholders (foreign investors, domestic financial institutions and the state) and minority shareholders on Dividend decisions in the post-2003 period as it witnesses the major economic and structural reforms. Design/methodology/approach The paper uses alternative Dividend Policy measures (the probability of paying Dividends, Dividend payout ratio and Dividend yield) and uses appropriate regression techniques (logit and tobit models) to test the research hypotheses, by focusing on a recent large panel dataset of 264 Istanbul Stock Exchange-listed firms (non-financial and non-utility) over a 10-year period 2003-2012. Findings The empirical results show that foreign and state ownership are associated with a less likelihood of paying Dividends, while other ownership variables (family involvement, domestic financial institutions and minority shareholders) are insignificant in affecting the probability of paying Dividends. However, all the ownership variables have a significantly negative impact on Dividend payout ratio and Dividend yield. Hence, the paper presents consistent evidence that increasing ownership of foreign investors and the state in general reduces the need for paying Dividends in the Turkish market. Research limitations/implications Because of the absence of empirical research on how ownership structure may affect Dividend Policy and the data unavailability for earlier periods in Turkey, the paper cannot make comparison between the pre-and post-2003 periods. Nevertheless, this paper can be a valuable benchmark for further research. Practical implications The paper reveals that cash Dividends are not used as a monitoring mechanism by investors in Turkey and the expropriation argument through Dividends for Turkish families is relatively weak. Accordingly, the findings of this paper may benefit Policymakers, investors and fellow researchers, who seek useful guidance from relevant literature. Originality/value To the best of the authors’ knowledge, this paper is the first to examine the link between ownership structure and Dividend Policy in Turkey after the implementation of major reforms in 2003.
