The discourse of inflation accounting

The value of a share is given by the dividend discount model as a simple function of future dividends; but the actual determination of the share price is rarely based upon the direct estimation of these future dividends. A ranking of the valuation models used by analysts and fund managers shows a preference for ‘unsophisticated’ valuation using, for example, the dividend yield rather than the dividend discount model. This finding is shown to depend upon the practical difficulty of using currently-available information to forecast future cash flows. This difficulty limits the quantitative basis of valuations to short forecast horizons, while the subjective, qualitative estimation of terminal value assumes great importance. Crucially, both analysts and fund managers use their own assessment of management quality to underpin the estimation of terminal value, on the basis that superior quality causes outperformance and that, whereas management quality can be assessed now, future performance itself is unobservable. Linked with this and with information asymmetry, valuation is a dynamic, company-specific process, focused on personal communication with management and embodying ongoing signalling and implicit contracting, using both dividends and other variables. This method of valuation causes formal valuation models such as the dividend yield to play only a limited role. They offer a benchmark of relative price differences, which serves as a basis from which to conduct subjective, company-specific analysis and to make investment decisions; but valuation models are not used exclusively, in themselves, to value shares.     

Stochastic equilibria of an asset pricing model with heterogeneous beliefs and random dividends

We investigate dynamical properties of a heterogeneous agent model with random dividends and further study the relationship between dynamical properties of the random model and those of the corresponding deterministic skeleton, which is obtained by setting the random dividends as their constant mean value. Based on our recent mathematical results, we prove the existence and stability of random fixed points as the perturbation intensity of random dividends is sufficiently small. Furthermore, we prove that the random fixed points converge almost surely to the corresponding fixed points of the deterministic skeleton as the perturbation intensity tends to zero. Moreover, simulations suggest similar behaviors in the case of more complicated attractors. Therefore, the corresponding deterministic skeleton is a good approximation of the random model with sufficiently small random perturbations of dividends. Given that dividends in real markets are generally very low, it is reasonable and significant to some extent to study the effects of heterogeneous agents’ behaviors on price fluctuations by the corresponding deterministic skeleton of the random model.     

Weak convergence of tree methods,to price options on defaultable assets

Abstract We discuss a practical method to price and hedge European contingent claims on assets with price processes which follow a jump-diffusion. The method consists of a sequence of trinomial models for the asset price and option price processes which are shown to converge weakly to the corresponding continuous time jump-diffusion processes. The main difference with many existing methods is that our approach ensures that the intermediate discrete time approximations generate models which are themselves complete, just as in the Black-Scholes binomial approximations. This is only possible by dropping the assumption that the approximations of increments of the Wiener and Poisson processes on our trinomial tree are independent, but we show that the dependence between these processes disappears in the weak limit. The approximations thus define an easy and flexible method for pricing and hedging in jump-diffusion models using explicit trees for hedging and pricing. Mathematics Subject Classification (2000): 60B10, 60H35 Journal of Economic Literature Classification: G13     

An inflated multivariate integer count hurdle model: an application to bid and ask quote dynamics

In this paper we develop a model for the conditional inflated multivariate density of integer count variables with domain ?ⁿ, n ∈ ?. Our modelling framework is based on a copula approach and can be used for a broad set of applications where the primary characteristics of the data are: (i) discrete domain; (ii) the tendency to cluster at certain outcome values; and (iii) contemporaneous dependence. These kinds of properties can be found for high‐ or ultra‐high‐frequency data describing the trading process on financial markets. We present a straightforward sampling method for such an inflated multivariate density through the application of an independence Metropolis–Hastings sampling algorithm. We demonstrate the power of our approach by modelling the conditional bivariate density of bid and ask quote changes in a high‐frequency setup. We show how to derive the implied conditional discrete density of the bid–ask spread, taking quote clusterings (at multiples of 5 ticks) into account. Copyright © 2009 John Wiley & Sons, Ltd.     

Option pricing with an illiquid underlying asset market

We examine how price impact in the underlying asset market affects the replication of a European contingent claim. We obtain a generalized Black–Scholes pricing PDE and establish the existence and uniqueness of a classical solution to this PDE. Unlike the case with transaction costs, we prove that replication with price impact is always cheaper than superreplication. Compared to the Black–Scholes case, a trader generally buys more stock and borrows more (shorts and lends more) to replicate a call (put). Furthermore, price impact implies endogenous stochastic volatility and an out-of-money option has lower implied volatility than an in-the-money option. This finding has important implications for empirical analysis on volatility smile.     

Deregulation of short selling and corporate cash dividend policy: A quasi-natural experiment from China

This study takes China’s short selling deregulation as a quasi-natural experiment, employs a sample of Chinese A-share listed firms from 2007 to 2017, and tests the impact of a short selling pilot on firms’ cash dividends using a difference-in-differences model (DID). We find that China’s short selling pilot significantly increases the pilot firms’ cash dividends. The mechanism test shows that short selling can improve the pilot firms’ cash dividends by playing a corporate governance role to restrain dual agency costs such as management fees and major shareholders’ tunneling. Furthermore, we identify that short selling restrains the behavior of “large stock dividends” and increases the cash dividends of “large stock dividends” firms. Moreover, the governance effect of short selling is complementary to the external governance environment. The higher the degree of marketization and government quality, the more significant the governance effect of short selling to increase the pilot firms’ cash dividends. This study enriches not only the research related to cash dividends in emerging economies, but also provides new empirical evidence for the evaluation of China’s short selling deregulation and offers valuable lessons to other emerging economies.     

A discrete choice model of dividend reinvestment plans: classification and prediction

We use a discrete choice recursive model to classify companies with and without dividend reinvestment plans (DRIPs). Our model classifies 72.0% of companies correctly. We interpret misclassified companies as being likely to switch their plan status. For example, if financial data erroneously suggest that a company should have a DRIP then we expect that it would be more likely to institute a plan than other companies in the sample. Our results support this conjecture. Companies that add DRIPs tend to have more extreme levels of variables that control for management entrenchment, higher levels of variables that control for the ability to pay dividends and higher payout ratios. Copyright © 2011 John Wiley & Sons, Ltd.     

A consistent model specification test with mixed discrete and continuous data

In this paper we propose a nonparametric kernel-based model specification test that can be used when the regression model contains both discrete and continuous regressors. We employ discrete variable kernel functions and we smooth both the discrete and continuous regressors using least squares cross-validation (CV) methods. The test statistic is shown to have an asymptotic normal null distribution. We also prove the validity of using the wild bootstrap method to approximate the null distribution of the test statistic, the bootstrap being our preferred method for obtaining the null distribution in practice. Simulations show that the proposed test has significant power advantages over conventional kernel tests which rely upon frequency-based nonparametric estimators that require sample splitting to handle the presence of discrete regressors.     

Pricing American barrier options with discrete dividends by binomial trees

We are concerned with the problem of pricing plain-vanilla and barrier options with cash dividends in a piecewise lognormal model. In the plain-vanilla case, we offer a method with provides thin upper and lower bounds of the exact binomial price. In the barrier case, we provide an efficient algorithm based on suitable interpolation techniques. As by-product, we provide a new method for pricing American barrier options with continuous dividends.     

The Impact of Unrealized Fair Value Adjustments on Dividend Policy

We examine the impact of unrealized fair value adjustments on dividend policy. Dividend payouts should include only persistent income [Lintner, J. (1956). Distribution of incomes of corporations among dividends, retained earnings and taxes. American Economic Review, 46(2), 97–113]. In our institutional setting, however, regulators recommend the non-distribution of any income from fair value adjustments, which suggests that they interpret them as transitory. We empirically demonstrate that fair value adjustments on investment property are persistent, while those on financial securities are transitory. We further show that only fair value adjustments from investment properties are distributed. We argue that managers perceive the persistence of the two fair value components correctly, and by doing so, they distribute income consistent with the Lintner framework rather than on regulatory recommendations. Finally, by focusing on managerial optimism, debt contracting, and insider ownership, we demonstrate the conditions under which firms choose to deviate from regulator recommendations and to distribute fair value profits.     

上市公司超能力派现信号效应实证研究

上市公司超能力派现已引起了广泛的关注,然而这一现象可能导致的市场反应却不为人们所了解。作者以深、沪两市2005年实行超能力派现上市公司为研究对象,根据股利公告日前后股价的变动资料,采取累计超额收益率进行实证研究,以此来分析市场对超能力派现的反应。实证研究结果表明,超能力派现对公司的股价具有负的信号传递作用。     

交通运输业股权结构与股利政策关系的研究

文章以2005—2007年期间我国交通运输板块28家上市公司数据为样本,利用固定影响的panel data模型对我国的交通运输业上市公司的股权结构和股利分配进行研究和分析。研究结果表明,我国交通运输业上市公司股权结构对股利分配率有显著性影响,流通股比例对资本利得有着特殊偏好,与股利支付率负相关;第一大股东持股比例和第二大股东持股比例与股利支付率正相关,前十大股东持股比例平方和与股利支付率负相关。     

Stale and Scale Effects in Markets-Based Accounting Research: Evidence from the Valuation of Dividends

Abstract

This study revisits prior research on the valuation of dividends in an accounting-based valuation framework. Using a battery of tests, we show that market value deflation is essential in market-based tests of dividend displacement and signalling because it controls for ‘stale’ information in addition to scale (size) differences across firms. For US firms, we show that after controlling for ‘stale’ information, the empirical association between dividends and market values switches from positive to negative. This switch is not explained by scale differences across firms. Further, we show that after controlling for staleness, the valuation of dividends remains positive for European firms. This result is explained by the relatively stronger association of dividends with future earnings in these settings (i.e. signalling). Lastly, our country-specific estimates of dividend valuation provide a potentially valuable index for studies aimed at examining the effects of accounting and securities regulation on information asymmetries in an international context.     

后危机时代中小企业股利政策的特征及成因分析

从中国证监会将现金分红派息作为上市公司再筹资的必要条件后,我国上市公司纷纷积极响应。中小企业作为我国经济的一部分,对宏观经济和政策法规有着极高的敏感性和适应性,它们对于股利政策的制定也在政策的引导下日趋成熟。中小企业的股利分配经历了从不分配到分配,从单纯现金股利的分配到与其他方式相结合的过程。但2007年以来,金融危机的爆发,再加上通货膨胀日益严重,使得多数中小企业都面临着成本上升、利润下滑的困境。本文通过分析2007年已在中小企业板上市运行的上市公司连续四年的的股利分配情况,得出现阶段中小企业股利政策的新特征。     

Is corporate payout taxation a long run phenomenon? Evidence from international data

This paper examines whether dividend and capital gains taxation influences corporate payout policy using the country level data of 21 countries in panel versions of time series models. We find that dividend relative to capital gains tax penalty is cointegrated with corporate payouts (dividends and share repurchases) i.e. corporate payout taxation may be a long run phenomenon. Further, the cointegrating vector estimates are largely consistent with the traditional view of dividend taxation whereby the tax penalty discourages dividends, while the estimates give limited support to the premise that firms substitute dividends for share repurchases in response to an increase in dividend tax penalty. Long run causality also operates between the tax penalty and payouts in the error correction models. Additionally, dividend tax appears to be more influential than capital gains tax on dividend payout decisions. Lastly, taxation affects dividends more significantly in countries with high investor protection.     

Nonlinear models of analysis of variance

It seems quite natural for economists to decompose a series with several indexes (time, industry, etc.) into several series with one index apiece, each of which will be analyzed separately. This operation has generally been made in a linear way in the traditional analysis of variance, possibly after some transformation of the initial series. We propose to do this in a multiplicative way which does not allow us to use the basic theorems of econometrics, and which is near factor analysis. We present several kinds of estimators, study their statistical properties and finally compare our method to more classical ones, using a series of the distribution of dividends paid by French corporations, available over 11 years for 26 industries.     

The dividend policies of all-equity firms: A direct test of the free cash flow theory

This paper finds support for Jensen's (1986) hypothesis that dividends and debt are substitute mechanisms for controlling the agency costs of free cash flow. We find that dividend payout ratios of a sample of all-equity firms are significantly higher than those of a control group of levered firms. Further, within the group of all-equity firms, firms with lower managerial holdings have higher payout ratios. These results hold after controlling for free cash flow and growth rates. Overall, our evidence suggests that dividends and managerial ownership are substitute mechanisms for reducing agency costs in all-equity firms.     

ESOPs, takeover protection, and corporate decision-making

ESOPs have the potential to align the interests of employees and owners and may increase firm value. However, employee ownership may also strengthen the position of entrenched management. The literature predicts that firms newly protected from takeover threat will tend to (1) increase long-term investment and (2) require additional external monitoring, and/or (3) may use leverage as part of an overall antitakeover strategy. We examined firms that have adopted ESOPs and find that firms raise the level of capital expenditures, research and development expenditures, and dividends. (JEF G320)     

Labor market entry and earnings dynamics: Bayesian inference using mixtures‐of‐experts Markov chain clustering

This paper analyzes patterns in the earnings development of young labor market entrants over their life cycle. We identify four distinctly different types of transition patterns between discrete earnings states in a large administrative dataset. Further, we investigate the effects of labor market conditions at the time of entry on the probability of belonging to each transition type. To estimate our statistical model we use a model‐based clustering approach. The statistical challenge in our application comes from the difficulty in extending distance‐based clustering approaches to the problem of identifying groups of similar time series in a panel of discrete‐valued time series. We use Markov chain clustering, which is an approach for clustering discrete‐valued time series obtained by observing a categorical variable with several states. This method is based on finite mixtures of first‐order time‐homogeneous Markov chain models. In order to analyze group membership we present an extension to this approach by formulating a probabilistic model for the latent group indicators within the Bayesian classification rule using a multinomial logit model. Copyright © 2011 John Wiley & Sons, Ltd.     

No-arbitrage condition and existence of equilibrium with dividends

In this paper we first give an elementary proof of existence of equilibrium with dividends in an economy with possibly satiated consumers. We then introduce a no-arbitrage condition and show that it is equivalent to the existence of equilibrium with dividends.