Dead Hand Proxy Puts and Hedge Fund Activism

2018 ◽  
Vol 54 (4) ◽  
pp. 1615-1642
Author(s):  
Sean J. Griffith ◽  
Natalia Reisel
Keyword(s):  
Cash Flow ◽  
Hedge Fund ◽  
Cost Benefit ◽  
Free Cash Flow ◽  
Cross Sectional ◽  
Flow Problems ◽  
Banking Relationships ◽  
Hedge Fund Activism ◽  
The Cost ◽  
Sectional Analysis

We investigate the Dead Hand Proxy Put, a contractual innovation in corporate debt agreements that may impact hedge fund activism. We find the provision principally in loans, not bonds, and provide evidence linking the adoption of the provision to hedge fund activism. Furthermore, controlling for endogeneity, we find that the provision significantly reduces the cost of loans. Bondholder wealth also increases. Moreover, cross-sectional analysis of share returns reveals that the provision is positively associated with repeat banking relationships and negatively associated with free cash flow problems, suggesting a cost-benefit tradeoff.

Investment and Cash Flow: New Evidence

2016 ◽  
Vol 51 (4) ◽  
pp. 1135-1164 ◽  
Author(s):  
Jonathan Lewellen ◽  
Katharina Lewellen
Keyword(s):  
Measurement Error ◽  
Cash Flow ◽  
Strong Evidence ◽  
Investment Decisions ◽  
Free Cash Flow ◽  
Financing Constraints ◽  
Flow Problems ◽  
Cash Flow Sensitivities ◽  
New Evidence

We study the investment–cash flow sensitivities of U.S. firms from 1971–2009. Our tests extend the literature in several key ways and provide strong evidence that cash flow explains investment beyond its correlation with q. A dollar of current- and prior-year cash flow is associated with $0.32 of additional investment for firms that are the least likely to be constrained and $0.63 of additional investment for firms that are the most likely to be constrained, even after correcting for measurement error in q. Our results suggest that financing constraints and free-cash-flow problems are important for investment decisions.

What explains the change in a firm’s idiosyncratic volatility after a dividend initiation?

2015 ◽  
Vol 41 (11) ◽  
pp. 1138-1158 ◽  
Author(s):  
Chintal A. Desai ◽  
Khoa H Nguyen
Keyword(s):  
Payout Policy ◽  
Free Cash Flow ◽  
Idiosyncratic Volatility ◽  
Cross Sectional ◽  
Content Type ◽  
Information Effects ◽  
Stage Analysis ◽  
Sectional Analysis ◽  
Dividend Tax ◽  
Robustness Check

Purpose – The purpose of this paper is to identify three (maturity, agency, and information) effects that help explain the change in idiosyncratic volatility after a firm initiates a dividend. Design/methodology/approach – The paper uses a cross-sectional analysis where the standard errors are adjusted for heteroskedasticity. As for robustness check, the authors perform two-stage analysis to control for potential self-selection bias. The authors also control for 2003 Dividend Tax Cut effect, matching-firm volatility, and confounding events. Findings – Using a sample of 688 dividend-initiating firms for a period of 1977 to 2010, the authors find evidence consistent with the hypotheses based on the maturity, agency, and information effects. The volatility changes upon the dividend initiation can be reliably explained by the changes in profit volatility and free cash flow per total assets, and whether the firm consummated a stock split prior to the dividend initiation. The information effect is also found to be economically significant. Originality/value – By studying a firm’s decision to initiate a dividend and its impact on the change in its volatility, the research helps contribute to the payout policy and volatility literatures.

scholarly journals Determinants of dividend behaviour in select indian companies - an empirical analysis

2013 ◽  
Vol 1 (1) ◽  
pp. 24-31
Author(s):  
Mohanraj V ◽  
Sounthri S
Keyword(s):  
Empirical Analysis ◽  
Cash Flow ◽  
Empirical Result ◽  
Flow Model ◽  
Firm Level ◽  
Cross Sectional ◽  
Dividend Policies ◽  
Indian Context ◽  
Main Determinants ◽  
Sectional Analysis

This study examines the Corporate Dividend Behaviour in the Indian context through Lintner‘s dividend model,Brittain‘s Cash Flow Model and Btittain‘s explicit Dividend Model. Results of this study will be uselful for designing dividend policies at the firm level and to analyze the saving behaviour at the macro level. The high dividend paying companies listed in NSE constitute the sample for the present study carried out as cross-sectional analysis for the year 2001-02 to 2011-12. The empirical result shows that the main determinants of current dividends are the Lagged Dividend and Current Earnings.

scholarly journals The Amount of Shares Held by Chaebol’s Other Affiliated Firms and Affiliated Firm's OwnershipControl Disparity: A Cross-Sectional Analysis

2007 ◽  
Vol 8 (2) ◽  
pp. 1-10
Author(s):  
Jae-Hyung Lee ◽  
Myung Hoon Yi
Keyword(s):  
Corporate Governance ◽  
Cash Flow ◽  
Cross Sectional ◽  
Dependent Variables ◽  
Net Assets ◽  
Sectional Analysis ◽  
The Relationship ◽  
Disparity Index ◽  
Ownership Control ◽  
Voting Right

We examine the relationship between the amount of shares held by Chaebol’s other affiliated firms and affiliated firm's ownership-control disparity. To this end, the ownership-control disparity equations are estimated with the ownership-control disparity index and the voting right leverage index as dependent variables, using cross-sectional data on 78 affiliated firms in Chaebols in 2005. These Chaebols are controlled by the ceiling on the total amount of holding shares of other affiliated firms in Chaebol. The estimation results with the ownership-control disparity index indicate that the increase in the amount of shares held by Chaebol’s other affiliated firms deepens the ownership-control disparity. And the amount of net assets and the amount of cash flow mitigate the ownership-control disparity. The estimation results of the voting right leverage index are almost the same as those of the ownership-control disparity index. We also find that the ownership-control disparity index is more elastic than the voting right leverage index with respect to the amount of shares held by Chaebol’s other affiliated firms. Overall, these empirical findings suggest that the ceiling on the total amount of holding shares of other affiliated firms in Chaebol can contribute to the desirable corporate governance.

scholarly journals Sodium glycerophosphate and prescribed calcium concentrations in pediatric parenteral nutrition: a retrospective observational study and economic evaluation

2019 ◽  
Vol 12 (5) ◽  
pp. 229-235
Author(s):  
Tippawan Siritientong ◽  
Suree Nimitwongsin
Keyword(s):  
Parenteral Nutrition ◽  
Calcium Concentration ◽  
Pediatric Patients ◽  
Average Rate ◽  
Cost Benefit ◽  
Cross Sectional ◽  
Federal Reserve Bank ◽  
Reserve Bank ◽  
Dipotassium Phosphate ◽  
The Cost

Abstract Background The risk of precipitation limits calcium and phosphate concentrations that can be administered parenterally to pediatric patients. As an alternative to dipotassium phosphate, sodium glycerophosphate (NaGlyP) is claimed to reduce the risk of precipitation in solutions for parenteral administration. Objectives To determine the calcium concentrations, NaGlyP, and dipotassium phosphate prescribed in pediatric parenteral nutrition orders and the cost–benefit of the organic phosphate. Methods We retrospectively collected cross-sectional data for parenteral nutrition orders from September 2014 to August 2015 for pediatric patients including neonates and children aged <18 years who were admitted to King Chulalongkorn Memorial Hospital, Bangkok, Thailand. Calcium concentration, calcium concentration adjustments, and costs of phosphate used per bag were analyzed. Results Of 2,192 parenteral nutrition orders, NaGlyP was used in 2,128 (97.1%) with calcium concentrations in the range of 0.84–139.91 mmol/L, which were significantly higher than calcium concentrations used with dipotassium phosphate (0.00–12.21 mmol/L, P < 0.001). There was no report of visible precipitation. Median costs of NaGlyP and dipotassium phosphate used per unit bag were not significantly different (35.88 and 41.25 Thai baht [THB] or 1.04 and 1.20 USD per bag, respectively, P>0.99; (1 USD equivalent to 34.241 THB U.S. Federal Reserve Bank G5.A annual average rate 2015). Conclusions Higher calcium concentrations could be achieved without increasing the direct cost per unit bag significantly as a result of using NaGlyP, an alternative to dipotassium phosphate as a source of phosphate for patients who require high amounts of calcium in parenteral nutrition.

scholarly journals Information Content of Dividend Changes in an Emerging Market

2004 ◽  
Author(s):  
Nur Adiana Hiau Abdullah ◽  
Rosemaliza Abdul Rashid ◽  
Yusnidah Ibrahim
Keyword(s):  
Cash Flow ◽  
Emerging Market ◽  
Abnormal Returns ◽  
Agency Cost ◽  
Free Cash Flow ◽  
Cross Sectional ◽  
Market Reactions ◽  
Dividend Announcements ◽  
Stock Market Reactions ◽  
Relationship Of

Supports on the free cash flow and agency cost theory from dividend announcements studies have been heavily discussed in the Western literature, but they have not been given much attention in the Asian countries, particularly in Malaysia. This paper focuses on examining the relationship of the stock market reactions due to dividend announcements and ten company-specific variables identified from the literature as potential determinants. The results from cross-sectional and stepwise regressions both showed that none of the determining variables could explain the variation in cumulative abnormal returns (CARs) for the increasing dividend announcements. For decreasing dividend announcements, both regressions identified the degree of anticipation to be significant and inversely related to CARs. In addition, the indigenous population ownership, which is a unique characteristic of the Malaysian equity market is also found to be significant in influencing the effect of decreasing dividend announcements. The findings provide no support for the free cash flow and agency cost theory.  

scholarly journals Zero-Debt Policy under Asymmetric Information, Flexibility and Free Cash Flow Considerations

2020 ◽  
Vol 13 (12) ◽  
pp. 296
Author(s):  
Anton Miglo
Keyword(s):  
Asymmetric Information ◽  
Cash Flow ◽  
Free Cash Flow ◽  
High Quality ◽  
Tax Rate ◽  
Investment Projects ◽  
Flow Problems ◽  
Investment Size ◽  
Debt Policy

We build a model of debt for firms with investment projects, for which flexibility and free cash flow problems are important issues. We focus on the factors that lead the firm to select the zero-debt policy. Our model provides an explanation of the so-called “zero-leverage puzzle”. It also helps to explain why zero-debt firms often pay higher dividends when compared to other firms. In addition, the model generates new empirical predictions that have not yet been tested. For example, it predicts that firms with zero-debt policy should be influenced by free cash flow considerations more than by bankruptcy cost considerations. Additionally, the choice of zero-debt policy can be used by high-quality firms to signal their quality. This is in contrast to most traditional signalling literature where debt serves as a signal of quality. The model can explain why the probability of selecting the zero-debt policy is positively correlated with profitability and investment size and negatively correlated with the tax rate. It also predicts that firms that are farther away from their target capital structures are less likely to select the zero-debt policy when compared to firms that are close to their target levels.

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