THE IMPACT OF DIVIDEND IMPUTATION ON FIRMS‘ FINANCIAL DECISIONS

This paper investigates the impact of Australia's dividend imputation system on the financial decisions to be faced by an Australian resident company. It briefly outlines the dividend imputation system as enacted, and then analyzes its economic effects on companies' dividend, financing and investment decisions.     

CONSIDERING DIVIDEND STABILITY IN THE RELATION BETWEEN DIVIDEND YIELDS AND STOCK RETURNS

Previous studies show that firms with long records of paying stable dividends are unique. However, research on the relation between dividend yields and stock returns focuses on shorter-term dividend yield measures without considering long-term dividend stability. This article shows that high-yield stocks are not in fact homogeneous, but that stocks with high yields and stable dividends behave differently from stocks with only a high yield. These differences persist even after controlling for firm size, the January effect, and systematic risk, suggesting distinctive risk characteristics for stocks with both high yields and stable dividends.     

FINANCIAL LITERACY AND PENSION INVESTMENT DECISIONS

The call for enhanced financial literacy amongst consumers is a global phenomenon, driven by the growing complexity of financial markets and products, and government concerns about the affordability of supporting an ageing population. Worldwide, defined benefit pensions are giving way to the risk and uncertainty of defined contribution superannuation/pension funds where fund members now make choices and decisions that were once made on their behalf. An important prerequisite for informed financial decision‐making is adequate financial knowledge and skills to make competent investment decisions. This paper reports the findings of an online survey of the members of a large Australian public sector‐based superannuation fund and shows that although respondents generally understand basic financial matters, on average, their understanding of investments concepts, such as the relationship between risk and returns, is inadequate. These results highlight the need for education programs focusing specifically on developing fund members’ investment knowledge and skills to facilitate informed retirement savings decisions.     

STOCK PRICE REACTIONS TO DIVIDEND AND EARNINGS ANNOUNCEMENTS: CONTEMPORANEOUS VERSUS NONCONTEMPORANEOUS ANNOUNCEMENTS

In this paper we examine stock price reactions to contemporaneous and noncontemporaneous dividend and earnings announcements. Overall, the stock price reaction to joint announcements is significantly greater than the reaction to just one signal. This implies that there is information content to two signals being given simultaneously, and that announcements are not perfect substitutes. Some evidence shows that the reaction to a joint announcement is approximately twice that to a noncontemporaneous announcement. On average, the stock price reaction to joint contradictory announcements is not significant. Finally, for joint announcements where only one of the two announcements is expected to affect the stock price significantly, the market reaction is determined by the nonzero signal.     

TRADING PATTERNS OF SMALL AND LARGE TRADERS AROUND STOCK SPLIT EX-DATES

We investigate the trading patterns of small and large traders around stock split ex-dates. Using the intraday transaction database for the Toronto Stock Exchange during 1983–89, we find that stock splits are associated with significant changes in trading patterns. Although stock splits appear to have little effect on the trading behavior of large traders (trade value of at least $100,000), they are associated with significant decreases in odd-lot trading and increases in small board-lot trading (trade value of less than $10,000). Although the liquidity premia decrease for all trade sizes, trade direction changes significantly from sell to buy after split ex-dates for all but the large trades, where the change is in the opposite direction. The significant increase in variances after split ex-dates is explained by various microstructure-related variables, and small (large) trades appear to be (de)stabilizing.     

FURTHER EVIDENCE ON DIVIDEND YIELDS AND THE EX-DIVIDEND DAY STOCK PRICE EFFECT

Ex-dividend day stock price behavior supports a tax clientele effect. This effect is still found after the Tax Reform Act of 1986. Results reflect an effective tax advantage for capital gains taxes payable at realization, versus dividend taxes due quarterly. Evidence also supports short-term trader participation in the ex-day phenomenon when the difference between dividend income and the ex-dividend-day price decrease exceeds transactions costs to trade. Results contradict prior research where a tax clientele effect is not found, but align with this prior research when including a small number of contaminated observations.     

AN INVESTIGATION INTO THE CAUSALITY AMONG FIRMS' DIVIDEND,INVESTMENT, AND FINANCING DECISIONS

In this paper we posit that information asymmetries and the resultant signaling implications make a firm's investment decision dependent on its dividend and financing decisions. By applying the vector autoregressive modeling technique to 100 firms randomly selected from ten four-digit SIC industries, we find evidence of interdependencies among the three decisions. The success of the model in predicting each of the three decision variables also suggests that these decisions should be analyzed in a simultaneous equation framework.     

EARNINGS FORECAST REVISIONS ASSOCIATED WITH STOCK SPLIT ANNOUNCEMENTS

Recent studies document abnormal stock returns at stock split announcements. Three hypotheses related to expected future earnings—the trading range, attention, and signaling hypotheses—have been offered as explanations. Evidence has also been provided that splitting firms have greater postannouncement earnings growth than control nonsplitting firms. Using earnings expectation data from the Institutional Brokers Estimate System, significantly greater forecast revisions are found in this study for split firms than for control nonsplit firms. The difference is significantly related to abnormal stock returns of splitting firms.     

EVIDENCE OF A RELATION BETWEEN STOCK PRICE REACTIONS AROUND CASH DIVIDEND CHANGES AND YIELDS

Here, the relation between stock price reactions to announced dividend changes and the yields of the underlying securities is examined. A significant positive (negative) relationship is detected between announcement date returns and yield for dividend increases (decreases) even after controlling for the magnitude of the dividend change. Price reactions associated with dividend increases vary directly with the change in yield and, on average, low-yielding companies do not experience abnormal returns when they increase their dividends. Implied in these results is that the information conveyed through dividend changes varies with the yield of the underlying security and the market response is a function of factors beyond the pure information effect.     

我国金融租金的特点及金融深化的路径探索

金融约束理论认为 ,政府应通过控制价格创造租金机会 ,诱致市场主体争夺租金 ,在租金争夺的过程中促进金融深化。本文分析了我国金融租金的特殊形式和租金争夺的特点 ,指出国有企业和国有银行本质上都归国家所有 ,同属一个所有者 ,他们并不是真正意义上独立的产权主体。所以产权虚置和产权共有是我国金融租金形成的制度基础。在此基础上 ,分析我国金融租金争夺主体、作用机制的特点 ,说明通过设立“租金机会”诱致金融深化的机理在我国并不成立。作者最后提出我国金融深化的路径是改革企业和金融产权制度 ,建立高效的法人治理结构 ,通过加大对中小企业的支持实施增量优化。     

USING DIVIDEND POLICY AND MANAGERIAL OWNERSHIP TO REDUCE AGENCY COSTS

In this study we examine dividends and chief executive officer (CEO) stock ownership as interrelated mechanisms that may be used to reduce agency costs. We find a significant nonmonotonic relation between dividend yield and CEO stock ownership. Our evidence shows that until the CEO becomes entrenched, increased executive stock ownership reduces agency costs and decreases dividend yield. Beyond that point, increased stock ownership increases dividend yield. Whether additional stock ownership can reduce agency costs depends upon the CEO's degree of control in the firm.     

LONG-TERM AND SHORT-TERM CAUSAL RELATIONS BETWEEN DIVIDENDS AND STOCK PRICES: A TEST OF LINTNER'S DIVIDEND MODEL AND THE PRESENT VALUE MODEL OF STOCK PRICES

In this paper we test the joint implications for the intertemporal behavior of stock prices and dividends expressed in the Lintner dividend model and the present value model of stock prices. We use macro data corresponding to quarterly S&P 500 index prices and dividends for January 1930–December 1990. The methodology used is the error correction model (ECM), which allows testing for long-term and short-term relations between the two variables. Results from the ECM indicate that a long-term equilibrium relation exists between dividends and stock prices, and that an error correction mechanism is at work when a disequilibrium exits between the two variables. Stock prices and dividends also influence each other in the short term. Finally, the results show that dividends and stock prices exhibit a contemporaneous causal relation.