The effects of ownership structure on dividend policy: Evidence from seasoned equity offerings (SEOs)

This paper examines the effects of ownership structure on dividend policy, specifically the role of controlling shareholders in shaping dividend policy in a sample of firms that pay dividends and issue new equity simultaneously. The results show that managers in weakly governed firms are more likely to initiate customized dividends to meet outside large shareholders' needs while simultaneously using costly external capital to finance new investment projects. This paper contributes to the existing literature on agency problems by explaining why firms engage in this suboptimal dividend policy: it allows large shareholders to extract private benefits.     

Mutual holding companies: Evidence of conflicts of interest through disparate dividends

The mutual holding company (MHC) structure establishes a dual-class stock that creates a unique opportunity to transfer wealth from thrift depositor–owners to new minority shareholders through the disparate payment of dividends. We show that MHCs are priced higher than comparable non-MHCs and dividend policy is a significant component of this valuation. We also show that MHC thrifts pay significantly higher dividends than non-MHC thrifts and that an Office of Thrift Supervision (OTS) ruling reducing the potential for disparate dividends between the two classes of shareholders resulted in lower dividends. These results have policy implications of special significance given that the OTS reversed its position in 2000 and because of the current controversy over the use of the MHC structure in the financial service industry.     

Dividend Payouts and Corporate Governance Quality: An Empirical Investigation

Motivated by agency theory, we investigate how a firm's overall quality of corporate governance affects its dividend policy. Using a large sample of firms with governance data from The Institutional Shareholder Services, we find that firms with stronger governance exhibit a higher propensity to pay dividends, and, similarly, dividend payers tend to pay larger dividends. The results are consistent with the notion that shareholders of firms with better governance quality are able to force managers to disgorge more cash through dividends, thereby reducing what is left for expropriation by opportunistic managers. We employ the two‐stage least squares approach to cope with possible endogeneity and still obtain consistent results. Our results are important as they show that corporate governance quality does have a palpable impact on critical corporate decisions such as dividend policy.     

The value of financial flexibility and corporate financial policy

We propose a novel approach to measure the value that shareholders assign to financial flexibility. In contrast to existing proxies for financial constraints, our measure is market-based, forward-looking and not directly influenced by past financial decisions. We find that firms for which shareholders consider financial flexibility more valuable have lower dividend payouts, prefer share repurchases to dividends, and exhibit lower leverage ratios. Moreover, these firms tend to accumulate more cash. Our analysis contributes to the growing literature on financial flexibility and indicates that—in line with prior survey evidence—financial flexibility considerations shape corporate financial policy.     

Payout flexibility and capital expenditure

Over the past two decades or so, repurchases have become an appealing method for disbursing cash to shareholders compared to the traditional dividends. Managerial perception as well as empirical evidence suggests that repurchases are inherently more flexible than dividends, which may account for their increasing popularity. The rigidity of dividends and the apparent flexibility of share repurchases could impact firm investments. Firms may forego profitable investment opportunities to maintain their dividend levels, while repurchases could be easily scaled back to fund profitable investment projects without fear of an adverse market reaction. We test the flexibility hypothesis of repurchases by regressing capital expenditures on repurchases and dividends in addition to other control variables. Consistent with our hypotheses, we find an inverse relationship between capital expenditures and repurchases but an insignificant relationship with dividends. Further, we find that the flexibility associated with repurchases is especially evident for firms that are financially constrained, and during the recent financial crisis period when external capital constraints were severe. Finally, we find that flexibility of repurchases with respect to capital expenditures is stronger in the more recent time period during which regulatory changes made repurchases more attractive as a mechanism to disburse cash back to shareholders.     

上市公司的股利政策究竟迎合了谁的需要——来自中国上市公司的经验数据

上市公司为什么要支付股利?传统的税收理论、信号模型以及代理假说等公司股利政策理论实际上都没最终完整地解释清楚这个"股利之谜"。最近美国学者Baker和Wurgler从行为公司财务角度出发提出了股利迎合理论,该理论认为公司支付股利的主要原因在于,管理者为了提高股价理性地迎合了股东对股利不断变化的偏好。本文认为,Baker和Wurgler提出的股利迎合理论忽略了上市公司股权结构的特征。在股权高度集中的上市公司里,管理者制订股利政策主要是为了迎合大股东的需求,广大中小投资者的股利偏好往往被忽视。本文以1994年至2005年间我国的上市公司为样本进行检验,研究结果支持了我们所提出的理论观点。     

Corporate dividend policy in practice: Evidence from an emerging market with a tax-free environment

Several theories have been proposed to explain why companies pay dividends. However, as of today, the dividend policy remains a puzzle as no convincing explanation has been given as to why firms pay cash dividends to their shareholders. This paper contributes to this debate by examining the dividend policy in an emerging market that has a tax-free environment. Specifically, we follow Brav et al. (2005) and examine this issue using survey and field interviews, in the particular context of the United Arab Emirates. Our results provide support for the proposition that dividend policy is conservative. We also find that dividends in the UAE are considered by managers as a residual cash flow, and are determined after investment decisions are made. When examining the determinants of dividend policy, we find that taxes are not important, that institutional investors are expected to play a role in disciplining managers, and that dividends may play a disciplinary role as well in controlling agency conflicts.     

Unintended Consequences of Changing Accounting Standards: The Case of Fair Value Accounting and Mandatory Dividends

A growing body of literature investigates the interaction of changes in accounting standards with institutions such as investor protection laws and corporate governance mechanisms. We examine the unintended consequences of fair value accounting in determining mandated preferred dividends. We study the case of Russian energy conglomerate UES, which had a good corporate governance track record and a consistent dividend history. Following its adoption of fair value accounting, UES reported the highest quarterly profit in world corporate history, but it subsequently omitted dividends for all its shareholders. The case analysis suggests that the transitory nature of fair value adjustments and the interaction with the investment policy were important considerations in justifying the dividend omission. The reduction in preferred dividends was not offset by any capital gains, and led to a wealth transfer from preferred to ordinary shareholders. Thus, requiring the use of fair value accounting when determining the dividend distribution base can lead to unintended consequences and increase agency costs for minority shareholders.     

Dividend payout and executive compensation: theory and evidence

Bhattacharyya (2007 ) develops a model in which compensation contracts motivate high‐quality managers to retain and invest firm earnings, while low‐quality managers are motivated to distribute income to shareholders. In equilibrium, the model shows that there is a positive (negative) relationship between the earnings retention ratio (dividend payout ratio) and managerial compensation. Results of tests of US data show that executive compensation is positively (negatively) associated with earnings retention (dividend payout). Our results indicate that corporate dividend policy is perhaps best understood by considering the payout ratio (dividends divided by earnings), rather than the level of cash dividends alone.     

Estructura de propiedad y su efecto en la política de dividendos en el contexto mexicano

In this paper we focus on analyzing if the ownership structure has any effect on the dividend policy in the Mexican market. The decision to pay dividends is one of the key elements within corporate policy, since that dividend policy has an influence on the company value. Therefore, decisions such as adopting a growth policy of the company through the profits reinvestment or destine these profits to dividends pay, could be influenced by the ownership structure. We base our analysis on three types of ownership structure: families, institutions (mainly banks) and small blocks of shareholders. Our results show that the concentration of ownership in families has a negative influence on the dividends payment, while the presence of institutional shareholders has an inverse effect. This indicates that the presence of large shareholders different to families have a dissimilar effect on dividend policy. Our work contributes to the literature in the context of emerging countries such as Mexico, since much of the existing research has focused primarily in environments such as Europe or the United States, where markets are well regulated with widely distributed property.     

CEO mobility and corporate payouts

We examine how chief executive officer (CEO) mobility affects corporate payouts. We exploit US state courts’ staggered adoption of the inevitable disclosure doctrine (IDD) to obtain exogenous variation in mobility. We report several findings. First, we find that firms in IDD-adopting states increase dividend payouts, whereas the effect of IDD on share repurchases is insignificant relative to firms not in IDD-adopting states. Second, the increase in dividends is concentrated on firms run by CEOs having high ability. Third, CEOs increasing dividends are less likely to be forced to leave their jobs. Fourth, the increase in dividends is concentrated on firms run by early-career CEOs rather than retiring CEOs. Last, CEOs increasing dividends receive more favorable shareholders’ say on pay votes for higher pay. Our evidence supports the notion that restricted mobility induces CEOs to choose a dividend policy that enhances their positions with their shareholders.     

Ownership structure and its effect on dividend policy in the Mexican context

This work focused on analyzing whether the ownership structure has any effect on the dividend policy of companies in the Mexican market. The decision of dividend payment is one of the major elements in corporate policy, as this dividend policy influences the value of the company. Therefore, decisions such as adopting a company growth policy through the reinvestment of profits, or better yet allocating them to the payment of dividends, are going to be influenced by the type of ownership structure that dominates the company. The analysis was based on three types of ownership structures such as: families, institutions (mainly banks) and small blocks of shareholders. Our results show that the concentration of property in families negatively influences the payment of dividends, whereas the presence of institutional shareholders has an inverse effect on the payment of the same. This indicates that the presence of big shareholders foreign to the families has a different effect on the payment policy of dividends in the Mexican context. This work provides literature information about the context of emerging countries as is the case of Mexico, given that much of the existing investigations focus on European or North American contexts, where the markets are well regulated and property is broadly distributed.     

Ownership structure and tax-friendly dividends

The paper examines the existence of tax-based dividend clienteles using the novel environment of Australia, which has operated a full dividend imputation system since 1987. The analysis jointly focuses on the tax-based preferences of five categories of shareholders, including both domestic and foreign-domiciled shareholder classes. Incorporating the dividend franking percentage as a direct measure of the degree of tax benefit associated with dividends, strong evidence supporting the existence of tax-based dividend clienteles is present for both domestic and foreign shareholder categories. This includes domestic corporate blockholders and company directors, and local institutional investors following tax reforms in 2000, and foreign institutional shareholders which, alternatively, demand lower dividends and dividend franking. These findings persist after considering the effect of share repurchases, and under various model specifications controlling for unobserved firm heterogeneity and potential endogeneity between ownership structure and dividend payout policy.     

中美资本市场财富效应比较研究

本文从股利支付和资本利得的角度对比分析了中美资本市场财富效应水平,并对其影响因素展开分析。研究发现,我国资本市场财富效应不够显著,A股上市公司虽然具有较高的股利支付倾向,但股利支付率和资本利得属性较弱;股利支付行为迎合监管动机较强,融资分红特征明显,股票股利支付行为具有高送转特征;资本市场估值中枢下移,指数波动性较高,资本利得属性较差。美股上市公司虽然股利支付意愿不及A股,但股利支付率和资本利得属性较强,且上市公司不存在明显的融资分红倾向。基于此,本文从控股股东属性、企业生命周期、管理层侵占行为、宏观经济和资本市场环境四个维度对A股市场财富效应水平展开深入探讨,并从提升公司质量、改善盈利能力、调整投资者结构、加强市场建设、优化股利监管制度五方面提出了改善我国资本市场财富效应的政策建议。     

Institutional tax clienteles and payout policy

This paper employs heterogeneity in institutional shareholder tax characteristics to identify the relation between firm payout policy and tax incentives. Analysis of a panel of firms matched with the tax characteristics of the clients of their institutional shareholders indicates that “dividend-averse” institutions are significantly less likely to hold shares in firms with larger dividend payouts. This relation between the tax preferences of institutional shareholders and firm payout policy may reflect dividend-averse institutions gravitating towards low dividend paying firms or managers adapting their payout policies to the interests of their institutional shareholders. Evidence is provided that both effects are operative. Plausibly exogenous changes in payout policy result in shifting institutional ownership patterns. Similarly, exogenous changes in the tax cost of institutional investors receiving dividends results in changes in firm dividend policy.     

半强制股利政策与股权融资成本

在一些国家,强制股利支付是改善公司治理和弥补法律保护不足的重要手段,我国自2001年起陆续出台了类似的半强制股利系列政策。然而现有部分研究却发现,半强制股利政策可能会产生监管“悖论”。那么,事实是否如此？以往这些研究主要从监管成本角度来分析,可能忽视了监管带来的收益,我们认为虽然半强制股利政策提高了融资门槛,但也可能实现股东之间的利益共享,并有利于投资者形成稳定的股利预期,从而实现治理的“溢价”。本文利用2008年监管政策提供的良好自然实验机会,主要从半强制股利政策的治理效应角度来评估政策产生的经济后果。研究发现,从总体平均意义上看,半强制股利政策有助于降低受影响公司的股权融资成本。进一步研究发现,在代理成本高的公司,半强制股利政策的治理作用更为明显,存在一定的治理“溢价”。当然,半强制股利政策也存在一定的局限性,在公司的信息披露质量差和外部融资约束较大的公司,半强制股利政策的治理效应被削弱。     

Why do CEOs agree to the discipline of dividends?

This study investigates dividend initiation as the product of the imbalance of power between shareholders and management in U.S. firms from 2003 to 2012. We find that dividend initiation is associated with a stronger governance structure (strong shareholders' rights and board independence), in accordance with the outcome model. We do not identify a single motivation for dividend initiation. Dividend-initiating firms tend to rely on various forms of governance balanced by the interests and ownership of CEOs and directors. Firms with institutional owners are more likely to initiate dividends concurrent with the turnover of the CEO. Dual CEOs initiate dividends when they own more shares, and boards of directors initiate dividends with a higher personal ownership stake when shareholders' rights are weak. We also find that when initiation is due to stronger governance, it is significantly related to the firm's investment opportunities, while for weak governance firms, that relationship is not observed. We interpret this as evidence that, under weaker governance, the decision to initiate dividends is motivated by agency conflicts rather than investment or capital structure considerations.     

Determinants of Corporate Dividend Policy: A Factorial Analysis

This paper re-examines the dividend policy issue by conducting a simultaneous test of the alternative explanations of corporate payout policy using a two-step procedure that involves factor analysis and multiple regression. Several new proxies for theoretical attributes that have appeared in the literature are introduced, including the role of managerial dimensions in determining dividend policy. Strong support is found for the transaction cost/residual theory of dividends. pecking order argument, and the role of dividends in mitigating agency problems. Strong support is also found for the role of managerial consideration in affecting the firm's payout policy; specifically, firms that maintain stable dividend policies and firms that enjoy financial flexibility pay higher dividends. The results appear to support the tax clientele argument.     

Nonnegotiable shares, controlling shareholders, and dividend payments in China

China has some unique institutional features. For example, the shares of listed firms are segmented into negotiable and nonnegotiable ones. The controlling shareholders, usually connected to the government, hold nonnegotiable shares. We examine how these institutional features affected cash dividend payments in China during the period 1994-2006. We find that dividend payments are positively associated with the proportion of nonnegotiable shares in a firm and the proportion of nonnegotiable shares held by the controlling shareholder; moreover, the 2001 China Securities Regulatory Commission stipulation requiring cash dividend payments does not benefit negotiable shareholders. However, we also find that dividend payments are downside flexible, and controlling shareholders cannot force firms to pay or to pay more dividends when firms' earnings decline significantly. The conventional factors, especially profitability or the capability to pay, still play an important role in determining the dividend policy. The propensity to pay and the payout ratio in China are not high compared to those of other countries.