The impact of catering incentives on the dividend policy: evidence from Turkish firms

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sefa Takmaz ◽  
Pınar Evrim Mandaci ◽  
M. Banu Durukan
Keyword(s):  
Capital Markets ◽  
Dividend Policy ◽  
Emerging Market ◽  
Common Law ◽  
Civil Law ◽  
Control Variables ◽  
Cross Sectional ◽  
Content Type ◽  
Propensity To Pay ◽  
The Impact

PurposeThe purpose of this paper is to empirically analyse the propensity to pay dividends and investigate whether the catering theory is valid in an emerging market.Design/methodology/approachThe sample of this study comprises listed firms on the stock market of Turkey, Borsa Istanbul, with 2,438 observations during the period 1999–2015. In line with previous studies in the literature, appropriate control variables are used that may have an impact on Turkish firms' dividend policy. Control variables are examined in the likelihood of paying dividends by using Fama–Macbeth (1973) style cross-sectional logistic regressions. In addition, the linkage between the dividend premium and the propensity to pay is revealed to test the validity of the catering theory.FindingsThe findings of the study confirm the tenets of the catering theory for Turkey. When a positive dividend premium exists, that is when investors demand dividend, firms cater them and distribute dividend; on the contrary, when there is no demand, firms prefer not to pay. The effect of catering incentives on the dividend policy provides useful information for managers because the catering theory claims that investors' demand for dividends has an impact on the valuation of firms.Originality/valueIn the aftermath of the 2001 financial crisis, Turkey implemented far-reaching reforms and policy initiatives to improve the efficiency of capital markets and to overcome the obstacles sourcing from their culture and civil law origin. With the adoption of these major economic and structural reforms, as a civil law origin country, Turkey has managed to ameliorate the protection of investors as in common law countries. Ferris et al. (2009) state that the catering theory is applicable to firms in common law countries but not in civil law countries. In addition, prior research is not so extensive regarding the impact of catering incentives on the dividend policy of firms in emerging markets. The results of the analyses suggest that the catering theory is valid for Turkey as a civil law origin emerging country, and to the best of authors' knowledge, this study is the first to test the catering theory in the Turkish capital markets.

The impact of board composition and ownership structure on dividend payout policy: evidence from Saudi Arabia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Helmi A. Boshnak
Keyword(s):  
Saudi Arabia ◽  
Ownership Structure ◽  
Dividend Policy ◽  
Payout Policy ◽  
Board Composition ◽  
Dividend Payout ◽  
Content Type ◽  
Listed Firms ◽  
Propensity To Pay ◽  
The Impact

PurposeThis study examines the impact of board composition and ownership structure variables on dividend payout policy in Saudi Arabian firms. In particular, it aims to determine the effect of board size, independence and meeting frequency, in addition to chief executive officer (CEO) duality, and state, institutional, managerial, family, and foreign ownership on both the propensity to pay dividends and dividend per share for Saudi-listed firms over the period 2016–2019.Design/methodology/approachThe paper captures dividend policy with two measures, propensity to pay dividends and dividend per share, and employs a range of regression methods (logistic, probit, ordinary least squares (OLS) and random effects regressions) along with a two-stage least squares (2SLS) model for robustness to account for heteroscedasticity, serial correlation and endogeneity issues. The data set is a large panel of 280 Saudi-listed firms over the period 2016 to 2019.FindingsThe results underline the importance of board composition and the ownership structure in explaining variations in dividend policy across Saudi firms. More specifically, there is a positive relationship between the propensity to pay dividends and board-meeting frequency, institutional ownership, firm profitability and firm age, while the degree of board independence, firm size and leverage exhibit a negative relation. Further, dividend per share is positively related to board meeting frequency, institutional ownership, foreign ownership, firm profitability and age, while it is negatively related to CEO duality, managerial ownership, and firm leverage. There is no evidence that family ownership exerts an impact on dividend payout policy in Saudi firms. The findings of this study support agency, signalling, substitute and outcome theories of dividend policy.Research limitations/implicationsThis study offers an important insight into the board characteristic and ownership structure drivers of dividend policy in the context of an emerging market. Moreover, the study has important implications for firms, managers, investors, policymakers, and regulators in Saudi Arabia.Originality/valueThis paper contributes to the existing literature by providing evidence on four board and five ownership characteristic drivers of dividend policy in Saudi Arabia as an emerging stock market, thereby improving on less comprehensive previous studies. The study recommends that investors consider board composition and ownership structure characteristics of firms as key drivers of dividend policy when making stock investment decisions to inform them about the propensity of investee firms to pay dividends and maintain a given dividend policy.

Social enterprises and organizational learning in South Africa

2018 ◽  
Vol 10 (1) ◽  
pp. 117-133 ◽  
Author(s):  
Boris Urban ◽  
Elena Gaffurini
Keyword(s):  
South Africa ◽  
Organizational Learning ◽  
Social Innovation ◽  
Emerging Market ◽  
Cross Sectional Study ◽  
Social Enterprises ◽  
African Countries ◽  
Cross Sectional ◽  
Content Type ◽  
The Impact

Purpose The purpose of this study is to determine the relationship between different dimensions of organizational learning capabilities (OLC) and levels of social innovation in social enterprises. Design/methodology/approach The empirical strategy adopted is a cross-sectional study based on primary survey data. Following a survey of social enterprises in South Africa, statistically analysis is conducted using regression analyses to test the study hypotheses. Findings The findings show that the OLC dimensions of knowledge conversion, risk management, organizational dialogue and participative decision-making all have a significant and positive relationship with social innovation. Research limitations/implications In many emerging economies, the notion of organizational learning appears to have considerable potential relevance, particularly as African countries are moving toward knowledge-based economies. By focusing on OLC, it is anticipated that social enterprises can configure and leverage the different factors in ways that enable them to overcome the constraints of the complex and unpredictable environments and increase their levels of social innovation. Originality/value The paper provides a pioneering empirical investigation into the impact that OLC has on levels of social innovation, in an under-researched emerging market context.

IFRS related party transactions disclosure and firm valuation in the United Arab Emirates emerging market

2017 ◽  
Vol 7 (2) ◽  
pp. 173-189 ◽  
Author(s):  
Walaa Wahid Elkelish
Keyword(s):  
United Arab Emirates ◽  
Financial Reporting ◽  
Emerging Market ◽  
Market Competition ◽  
Negative Relationship ◽  
Firm Valuation ◽  
Control Variables ◽  
Content Type ◽  
Related Party Transactions ◽  
The Impact

Purpose The purpose of this paper is to investigate the relationship between related party transactions disclosure (RPTD) and firm valuation in the United Arab Emirates (UAE), an emerging market. Design/methodology/approach Data on study variables were obtained manually from the published financial statements of all listed companies in the stock market during the period 2008-2012. Panel regression analysis models with fixed and random effects were used to ensure reliability of results. Several robustness checks were undertaken on the study outcomes. Findings The empirical results show that there is a significant negative relationship between RPTD and firm valuation in the UAE. RPTDs for subsidiaries and associates have the most damaging impact on firm valuation. Other control variables such as corporate governance disclosure (CGD), debt to equity, asset tangibility and sales growth show significant impact on firm valuation. Research limitations/implications The potential difference in the understanding of what constitutes “related party” across companies may affect the extent of related party disclosure across companies. Furthermore, some variables are not controlled for such as ownership structure and cultural values. Practical implications This paper provides useful practical guidelines for regulatory agencies, corporate managers and other stakeholders for improving the financial reporting system. Originality/value RPTD was measured according to the International Financial Reporting Standards (IAS 24) standards. Furthermore, the impact of new control variables such as CGD and product market competition was tested for financial and non-financial sectors.

IFRS and accounting quality: legal origin, regional, and disclosure impacts

2016 ◽  
Vol 24 (3) ◽  
pp. 296-316 ◽  
Author(s):  
Ajit Dayanandan ◽  
Han Donker ◽  
Mike Ivanof ◽  
Gökhan Karahan
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Common Law ◽  
Civil Law ◽  
Discretionary Accruals ◽  
Income Smoothing ◽  
Content Type ◽  
The World ◽  
The Impact

Purpose The purpose of this study is to examine whether the quality of financial reporting has improved after the adoption of International Financial Reporting Standards (IFRS) in Europe and across the world. The study investigates the impact of IFRS on income smoothing and earnings management in different geographic regions under different legal origins and disclosure environments. Design/methodology/approach To measure income smoothing in the pre- and post-IFRS periods, the authors use the coefficient of variation and the panel unit root model proposed by Im et al. (2003) for testing whether net income is stationary throughout the sample period. The study uses a dynamic panel estimation framework, as it captures the dynamics of IFRS on discretionary accruals efficiently. Discretionary accruals are used to measure earnings management. Findings The results suggest that the adoption of high quality standards, such as IFRS, reduces income smoothing and earnings management. In addition, the study finds that earnings management has decreased in the post-IFRS period, in particular, for French and Scandinavian civil law countries, but not for German civil law countries and common law countries. The latter can be explained by the fact that common law countries have strong investor protection laws, strict law enforcement and high disclosure levels of financial information. The study also finds empirical evidence that the adoption of IFRS reduces earnings management in countries with high levels of financial disclosure. Overall, the study shows that the adoption of IFRS improved the quality of financial reporting. Originality/value This study is useful for accounting standard setters across the world, including those countries that have not yet decided to adopt IFRS. The study contributes to the literature by examining the adoption of IFRS in income smoothing and earnings management under different legal regimes and disclosure environments by using advanced empirical methodologies.

Impact of disputed tax litigation risk on firm performance: evidence from India

2018 ◽  
Vol 31 (3) ◽  
pp. 458-478 ◽  
Author(s):  
Saumya Ranjan Dash ◽  
Mehul Raithatha
Keyword(s):  
Firm Performance ◽  
Stock Return ◽  
Emerging Market ◽  
Litigation Risk ◽  
Cross Sectional ◽  
Content Type ◽  
Listed Firms ◽  
Return Behavior ◽  
Contingent Liability ◽  
The Impact

PurposeThe purpose of this study is to investigate the impact of disputed tax litigation risk on firm performance and stock return behavior using a sample of Indian listed firms.Design/methodology/approachThe authors use disputed tax liability, reported as a contingent liability by the listed firms, as a proxy for the disputed tax litigation risk. To examine the impact of disputed tax litigation risk on firm performance (measured by accounting and market-based measures), the empirical approach used in this study focusses on the panel estimation technique. A portfolio-based approach using alternative asset pricing models examines the cross-sectional return variation because of the influence of disputed tax litigation risk.FindingsThe results of this study show a negative relationship between firm performance measures and disputed tax litigation risk. Cross-sectional test results reveal that higher disputed tax litigation risk is associated with higher expected returns.Research limitations/implicationsThis study focusses on disputed tax reported under the heading of contingent liability as a proxy for litigation risk. The study will help investors and portfolio managers to consider disputed tax litigation risk as an important parameter in the evaluation of firm performance. This study will also help regulators to get feedback on tax related policies and improve the dispute resolution process.Originality/valueThis study adds to the existing literature on the relationship between litigation risk and firm performance. In the context of emerging market, this study is the first-of-its-kind study, which focusses on disputed tax as a litigation risk proxy and examines its possible impact on firm performance and stock return behavior.

Voluntary disclosure and information asymmetry: do investors in US capital markets care about carbon emission?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ajay Adhikari ◽  
Haiyan Zhou
Keyword(s):  
Information Asymmetry ◽  
Capital Markets ◽  
Carbon Emission ◽  
Complete Information ◽  
Cross Sectional ◽  
Content Type ◽  
The Public ◽  
Bid Ask Spread ◽  
The Usa ◽  
The Impact

Purpose This paper aims to exploit the varying level of responses to the carbon disclosure project (CDP) to assess the economic consequences of carbon emission disclosure by disclosure level. Economic theory suggests that increased disclosures by a firm should lower the information asymmetry component of the firm’s cost of capital. Using CDP disclosures by US firms, the authors study the effect of voluntary carbon emission on the information asymmetry risk in capital markets. Design/methodology/approach The authors conduct cross-sectional analyses to examine whether, from the investor perspective, firms with varying CDP disclosure levels experience differential information asymmetric risk. The authors also conduct a pre- and post-disclosure comparison to examine whether the market responds to first-time carbon emission disclosure with decreases in the relative bid-ask spread. Findings In the cross-sectional analysis, the authors find that firms that decline to disclose carbon emission information, firms that provide incomplete information and firms that do not respond to the CDP survey have higher information asymmetry than firms that provide complete information and opt to make it available to the public. Using a pre- and post-disclosure comparison, the authors find that the market responds to first-time carbon emission disclosure with decreases in the relative bid-ask spread. Additionally, only firms that participate, provide complete disclosures and opt to make it available to the public enjoy the largest reduction in bid-ask spreads, which is followed by firms that provide incomplete information. Other firms do not experience a reduction in information asymmetry. Research limitations/implications This study examines the impact of CDP disclosures on information asymmetry using a US sample. The results of the study may not be generalizable to other countries that have different institutional arrangements and settings. Practical implications The study has important social and policy implications. The findings on the role of carbon emission disclosures in reducing information asymmetry in the capital markets suggest the need for policymakers to promote greater carbon emission disclosures in the USA and other countries where such disclosures have been traditionally less emphasized. As to stakeholders, bringing corporate carbon emission disclosure in line with recommended guidelines will require them to exercise more direct stakeholder pressure to encourage firms to fully participate in the CDP project. This is particularly critical in settings of regulatory inaction and weak enforcement with respect to environmental policies and disclosure such as the USA. Social implications The results span the current gap between two broad perspectives on corporate social responsibilities. The traditional shareholder perspective argues that companies only participate in socially responsible activities which increase shareholder value, while an alternate perspective argues that companies also undertake social responsibilities to benefit society even at the cost of shareholders (Moser and Martin, 2012). The study demonstrates that the two perspectives are not always at odds, carbon emission disclosure not only provides important information on the corporate social responsibility of the firm but also contributes to enriching the information environment leading to reduced information asymmetry in the equity markets for US firms. Thus, from both a stakeholder and capital market perspective, firms have incentives to provide carbon emission disclosures voluntarily. More direct stakeholder pressure may be helpful to encourage more firms to provide complete carbon emission information and opt to make it available to the public. Originality/value Few studies investigate the impact of CDP disclosure on the information environment of public companies. The lack of research on this key connection between new disclosures on carbon emissions and information asymmetry in the capital markets is the primary motivation for the paper. The study also provides important insights on disclosure level; just participating in the CDP survey is not enough, the degree of participation is also important. The results of the study suggest that the varying level of disclosure matters, the greatest benefits in terms of reduction of information asymmetry accrue to firms that provide complete information and opt to make it available to the public.

Drivers of brand credibility in consumer evaluation of global brands and domestic brands in an emerging market context

2020 ◽  
Vol 29 (7) ◽  
pp. 849-861 ◽  
Author(s):  
Ankur Srivastava ◽  
Dipanjan Kumar Dey ◽  
Balaji M.S.
Keyword(s):  
Structural Equation ◽  
Emerging Market ◽  
Purchase Intentions ◽  
Equation Modeling ◽  
Cross Sectional ◽  
Content Type ◽  
Consumer Evaluation ◽  
Global Brands ◽  
Brand Credibility ◽  
The Impact

Purpose The purpose of this study is to examine the impact of brand credibility on purchase intentions toward global brands and domestic brands in an emerging market context. It further examines three drivers of brand credibility: perceived globalness, perceived local iconness and perceived authenticity. Design/methodology/approach A structured questionnaire was used for data collection. Systematic random sampling using the mall intercept technique was used to collect cross-sectional data from 836 customers in India. Hypotheses were tested by using structural equation modeling with AMOS 21. Findings The results demonstrate the significance of brand credibility on purchase intentions. Furthermore, brand globalness differentially influence brand credibility for global and domestic brands. Research limitations/implications The findings provide key insights for marketers regarding consumer evaluation of global brands and domestic brands in emerging markets. Originality/value This study contributes to the literature by proposing and testing the key role of brand credibility in consumer choice of global brands versus domestic brands in an emerging market context.

Does corporate governance affect dividend policy in India? Firm-level evidence from new indices

2019 ◽  
Vol 45 (9) ◽  
pp. 1219-1238
Author(s):  
Debasis Pahi ◽  
Inder Sekhar Yadav
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Dividend Policy ◽  
Emerging Market ◽  
Board Structure ◽  
Governance Mechanism ◽  
Tobit Regression ◽  
Control Variables ◽  
Content Type ◽  
Compensation Committee

Purpose The purpose of this paper is to investigate the nexus between corporate governance and dividend policy of listed Indian firms. Design/methodology/approach Using new corporate governance stipulations, five new indices were constructed, namely, overall board governance index, board structure index, audit committee index, compensation committee index and nomination committee index. Using the newly developed indices, disclosure index and different firm-specific control variables, different panel Logit and Tobit regression models were estimated for 482 non-financial and non-utility listed firms during 2006–2017. Also, before the econometric analysis, mean difference test was conducted to examine the differences in dividend behaviour and corporate governance practices during pre- and post-Companies Act, 2013 and between payers and non-payers. Findings The overall evidence suggests that the firms having stronger corporate governance tend to pay higher dividends suggesting that the firm’s propensity to pay dividends increases with the improvement in corporate governance standards. Among the corporate governance indices board structure, audit committee and disclosure norms show a significant and positive relationship, whereas compensation committee and nomination committee show a positive but insignificant relationship with dividend policy. Control variables mostly had the expected impact on the dividends of the firms. Practical implications This study suggests that the establishment of the strong and effective corporate governance system is desirable to mitigate the agency conflicts between managers and shareholders and limit managers’ opportunistic behaviour in dividend payout policy. Originality/value This study is one of the latest studies to use several newly constructed indices on corporate governance mechanism based on new stipulations which bring new evidence on their specific impact on the dividend policy for an emerging market economy like India.

scholarly journals An empirical analysis of the performance of sponsored vs non-sponsored IPOs

2019 ◽  
Vol 10 (1) ◽  
pp. 100-116
Author(s):  
Sheeja Sivaprasad ◽  
Roshni Dadhaniya
Keyword(s):  
Capital Markets ◽  
Private Equity ◽  
Positive Impact ◽  
Emerging Market ◽  
Abnormal Returns ◽  
Operational Performance ◽  
Operating Characteristics ◽  
Cross Sectional ◽  
Content Type ◽  
The Usa

Purpose India is one of the largest IPO markets in the world. However, IPO research in the developing world is limited. The purpose of this paper is to test the performance of Indian IPOs based on sponsored vs non-sponsored issues. The authors classify the IPO sample into venture capital (VC) and private equity (PE) sponsored issues and non-sponsored ones and include key operating characteristics as performance predictors. Design/methodology/approach The dependent variable is the buy-and-hold abnormal returns. The study uses key operating characteristics such as market capitalization, net sales, earnings before interest, taxes, depreciation and amortization, depreciation and amortization, price-to-book, asset turnover and leverage. A cross-sectional analysis is applied to test the long-run performance. Findings Sponsored IPO issues convey favourable information to investors about future earnings and prospects of the firm. The findings indicate that sponsored issues and, in particular PE sponsored issues are perceived by investors as having a positive impact on the operational performance of firms that the PE firms are involved in relative to the constituents of the index and this superior operational performance over time also leads to relatively better performing share prices. There are significant differences in terms of market size, industry classification and key operating characteristics across the three groups of issues. Research limitations/implications This study has had to deal with much smaller samples of PE and VC when compared to similar studies conducted in the developed markets such as the UK and the USA. Further robustness tests on the market performance using factor models posed a problem due to limitation of the availability of these factors. Practical implications For the capital markets investors and policy makers, this research demonstrates the increasingly important role that PE and VC funds play in the investment landscape in India. It exhibits the increasing investor confidence in the Indian capital markets. Originality/value Using a sample of Indian IPOs comprising VC sponsored and PE sponsored issues, this study analyses the performance of Indian IPOs in an emerging market setting. This study, thus, contributes to the limited IPO research undertaken in developing markets.

Factors affecting dividend policy in manufacturing companies in Indonesia Stock Exchange

2019 ◽  
Vol 39 (1) ◽  
pp. 4-17
Author(s):  
Eko Wahjudi
Keyword(s):  
Dividend Policy ◽  
Stock Exchange ◽  
Emerging Market ◽  
Secondary Data ◽  
Manufacturing Companies ◽  
Content Type ◽  
Factors Affecting ◽  
Independent Variable ◽  
Net Assets ◽  
The Impact

Purpose The purpose of this paper is to analyze the variables that significantly affect dividend policy. Design/methodology/approach This research uses a type of comparative causal research (causal-comparative research), where the fact or event is identified as an influenced variable (dependent variable) and the variables that influence (independent variable) are investigated. In this study, the authors want to examine the effect of collateralizable assets, growth in net assets, liquidity, leverage and profitability of dividend policy by using quantitative approach. The data used are secondary data obtained from Indonesia Stock Exchange website with website address: www.idx.co.id. Findings The results showed that collateralizable assets have a negative, but not significant, effect on dividend policy. This shows that the high collateralizable assets do not affect the policy of the dividend of manufacturing companies. The second variable, growth in net assets, has a negative and significant effect on dividend policy. This shows that the higher growth in net assets will lower the dividend policy of manufacturing companies. Furthermore, the results show that liquidity has a negative and significant effect on dividend policy. This indicates that higher liquidity will lower the dividend policy of manufacturing companies. Furthermore, result that leverage has a negative and significant effect on dividend policy is obtained. This suggests that the higher leverage will lower the dividend policy of the manufacturing company. And lastly, profitability has a negative, but not significant, effect on dividend policy. This shows that high profitability does not affect dividend policy of manufacturing companies. Originality/value The authors contribute to prior research by providing the empirical evidence on the impact of collateralizable assets, growth in net assets, liquidity, leverage and profitability on dividend policy in Indonesia market as an emerging market.

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