The impact of uncertainty on payout policy

2016 ◽  
Vol 42 (11) ◽  
pp. 1054-1072 ◽  
Author(s):  
Brian Walkup
Keyword(s):  
Cash Flow ◽  
Large Data ◽  
Cash Flows ◽  
Payout Policy ◽  
Market Uncertainty ◽  
Policy Decisions ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to investigate the impact of market-level uncertainty on dividend and repurchase decisions. Design/methodology/approach Using a large data set over a nearly 50-year period, the author examines the choice to pay dividends and repurchase shares using logit and multinomial logit regressions. Findings Market-level uncertainty (measured by a GARCH estimate of volatility, as well as the Chicago Board Options Exchange Volatility Index) is shown to have a statistically significant impact on firms’ payout policy decisions. This impact is different for dividends and repurchases as well as for firms with differing levels of cash flows. As market uncertainty increases, firms with low cash flow levels tighten dividend policy to conserve cash while firms with high cash flow levels become opportunistic through the use of share repurchases. Practical implications The findings allow investors to better understand the connection between shifts in market-level uncertainty and corporate payout policy, specifically through the differing use of dividends and repurchases. Originality/value While prior literature on payout policy has focused on firm-level determinants, this study demonstrates that market-level uncertainty impacts firms’ payout policy decisions uniquely. Furthermore, this is, to the author’s knowledge, the first study to differentiate by relative cash flow level, demonstrating that not all cash flow levels react in the same manner.

Corporate cash flow and dividends smoothing: a panel data analysis at Bursa Malaysia

2015 ◽  
Vol 13 (1) ◽  
pp. 2-19 ◽  
Author(s):  
Apedzan Emmanuel Kighir ◽  
Normah Haji Omar ◽  
Norhayati Mohamed
Keyword(s):  
Panel Data ◽  
Cash Flow ◽  
Panel Data Analysis ◽  
Generalized Method Of Moments ◽  
Cash Flows ◽  
Payout Policy ◽  
Free Cash Flow ◽  
Content Type ◽  
Financial Firms ◽  
The Impact

Purpose – The purpose of this paper is to contribute to the debate and find out the impact of cash flow on changes in dividend payout decisions among non-financial firms quoted at Bursa Malaysia as compared to earnings. There has been renewed debate in recent finance and accounting literature concerning the key determinants of changes in dividends payout policy decisions in some jurisdictions. The conclusion in some is that firms base their dividend decisions on cash flows rather than published earnings. Design/methodology/approach – The research made use of panel data from 1999 to 2012 at Bursa Malaysia, using generalized method of moments as the main method of analysis. Findings – The research finds that Malaysia non-financial firms consider current earnings more important than current cash flow while making dividends payout decisions, and prior year cash flows are considered more important in dividends decisions than prior year earnings. We also found support for Jensen (1986) in Malaysia on agency theory, that managers of firms pay dividends from free cash flow to reduce agency conflicts. Practical implications – The research concludes that Malaysian non-financial firms use current earnings and less of current cash flow in making changes in dividends policy. The policy implication is that current earnings are dividends smoothing agents, and the more they are considered in dividends payout decisions, the less of dividends smoothing. Social implications – If dividends smoothing is encouraged, it could lead to dividends-based earnings management. Originality/value – The research is our novel contribution of assisting investors and government in making informed decisions regarding dividends policy in Malaysia.

Revisiting the impact of organized labor on corporate bottom lines

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dmytro Osiichuk ◽  
Paweł Mielcarz ◽  
Julia Kavalenka
Keyword(s):  
Financial Performance ◽  
Organized Labor ◽  
Corporate Financial Performance ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
International Panel ◽  
Transmission Mechanisms ◽  
Credible Threat ◽  
The Impact

Purpose Relying on an international panel data set, the purpose of this paper is to quantify the economic impact of labor unionization on corporate financial performance. Design/methodology/approach Static panel regression analysis is performed for a firm-level multinational data set to elucidate the postulated empirical relationships between employee unionization and corporate performance. The transmission mechanisms intermediating the studied effects are discussed and operationalized. Findings The empirical evidence demonstrates that firms with a higher level of employee unionization spend more on wages and labor-related expenses. The concomitant downside of higher resource extraction by unions is a lower rate of net employment creation and a higher possibility of redundancy layoffs. Originality/value Overall, the authors demonstrate that by creating a credible threat of employee disobedience manifested through strikes and internal wage disputes, labor unions remain an effective mechanism of increasing employees’ bargaining power. Despite the discovered weak negative associative link between the degree of unionization and corporate financial performance, the authors perceive the overall evidence to be inconclusive on this matter.

The effect of auditor industry specialization and board independence on the cash flow reporting classification choices under IFRS: evidence from Taiwan

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shuling Chiang ◽  
Gary Kleinman ◽  
Picheng Lee
Keyword(s):  
Cash Flow ◽  
Financial Reporting ◽  
Negative Relationship ◽  
Cash Flows ◽  
Board Independence ◽  
Firm Level ◽  
Industry Specialization ◽  
Content Type ◽  
Auditor Industry Specialization ◽  
Board Of Director

Purpose This study aims to explore the relationship between audit partner and firm industry specialization and board of director independence on the decision by Taiwanese firms to use International Financial Reporting Standards (IFRS) flexibility concerning reporting interest income and expense and dividends received in different sections of the statement of cash flows. This flexibility existed in Taiwan for the first time in 2013, the year that Taiwan switched from its own generally accepted accounting principle to IFRS. Design/methodology/approach Using 2013 data for a sample of 1,227 firms, 354 of whom changed their reporting classification, this study examined the interaction effect of board independence and partner-level and firm-level auditor industry specialization on the cash flow reporting decision using logistic regression. Findings The results show there is a substitute relationship between board independence and partner-level industry specialization on the change in cash flow reporting classification, but a complementary relationship between board independence and firm-level auditor specialization. Further, both partner-level and firm-level auditor industry specializations have a complementary (but negative) relationship with board independence as to whether the firm is likely to report interest expense paid in the operating or financing activities sections. Practical implications An important implication is that knowing the levels of audit firm and partner specialization and how independent the board is, is useful for researchers and regulators in investigating auditor-client relationships and understanding the influences of variables investigated here on the outcome(s) of accounting policy and regulatory changes. Originality/value This study improved the field’s understanding of the impacts of audit partner and firm specialization, board independence and relevant interactions on cash flow reporting choices.

Firm-level agreements, employment strategies and temporary workers

2020 ◽  
Vol 42 (1) ◽  
pp. 194-212
Author(s):  
Saverio Minardi
Keyword(s):  
Fixed Effects ◽  
Selection Process ◽  
Temporary Employment ◽  
Least Square ◽  
Temporary Workers ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
Collective Agreements ◽  
The Impact

Purpose The purpose of this paper is to investigate the impact of two-tier firm-level collective agreements on firms’ propensity to use temporary employment, accounting for the process of self-selection of firms into different bargaining levels in the Italian context. It further examines which firm-level characteristics drive this process of selection. Design/methodology/approach The empirical analysis uses a panel data set of Italian firms for the years 2005, 2007, 2010 and 2015. Estimations are produced and compared through ordinary least square regression, random-effects and fixed-effects models. Findings Results show that enterprises adopting two-tier firm-level agreements (TTFA) are associated with lower levels of temporary workers. However, a longitudinal analysis suggests that introducing a TTFA does not impact firms’ propensity to employ temporary workers. This novel finding highlights the presence of a selection process based on firm-level time-constant characteristics. The paper argues that these characteristics refer to management orientation toward high-road rather than low-road employment strategies. Further evidence is brought in support of this claim, showing that firms’ propensity toward the provision of training for their labor force partially explain the process of selection. Originality/value The study is the first to analyze the impact of secondary-level collective agreements on firms’ reliance on temporary employment, offering new evidence on the causes of the expansion of temporary employment. It further highlights the relevance of employers’ strategies in shaping the impact of the bargaining structure.

Corporate tax planning and corporate tax disclosure

2019 ◽  
Vol 28 (2) ◽  
pp. 327-364
Author(s):  
Mahfoudh Hussein Mgammal
Keyword(s):  
Positive Impact ◽  
Positive Influence ◽  
Tax Planning ◽  
Corporate Tax ◽  
Effective Tax Rate ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
The Impact ◽  
Practical Implications

Purpose This paper aims to examine the impact of corporate tax planning (TP) on tax disclosure (TD). Using tax expenses data set, with the detailed effective tax rate (ETR) by reconciling individual items of income and expenses. Design/methodology/approach A firm-level panel data set is used to analyse 286 non-financial listed companies on Bursa Malaysia that spans the period 2010-2012. Multivariate statistical analyses were run on the sample data. The empirical understanding of TD depends on public sources of data in the financial statement, characterized in the aggregated note of tax expenses. Fitting with Malaysian environment, the authors measured TD using modified ETR reconciling items. Findings Results show that TP, exhibit a robust positive influence on TD. This suggests that TP is related to lower corporate TD. In addition, companies with high TP attempt to mitigate the disclosure problem by increasing various TD. The authors further find significant positive impact between each of firm size and industry dummy, on TD. This means that company-specific characteristics are significant factors affecting corporate TD. Research limitations/implications This study contributes to the literature on the effect of TP on TD. It depends on both the signalling theory and the Scholes–Wolfson framework, which are the main theories concerned with TP and TD. Therefore, from a theoretical side, the authors add to the current theories by verifying that users are the party influenced whether positively or negatively, by the extent of TD or the extent of TP activities through Malaysian organizations. Practical implications The evidence found in this paper has important policy and practical implications for the authorities, researchers, decision makers and company managers. The findings can provide them some relevant insights on the importance of TP actions from companies’ perspective and contribute to the discussion of who verifies and deduces from TD directed by companies. Originality/value This paper originality is regarded as the first attempt to examine the impact of TP on TD in a developing country such as Malaysia. Malaysian setting is an interesting one to examine because Malaysia could be similar to other countries in Southeast Asia. Results contribute significant insights to the discussion about TD regarding, which parties are responsible for the verification of TD by firms, and which parties benefit from this disclosure. Findings suggest that companies face a trade-off between tax benefits and TD when selecting the type of their TP.

Does good corporate governance constrain cash flow manipulation? Evidence from India

2016 ◽  
Vol 42 (11) ◽  
pp. 1034-1053 ◽  
Author(s):  
Neerav Nagar ◽  
Mehul Raithatha
Keyword(s):  
Corporate Governance ◽  
Cash Flow ◽  
Performance Indicator ◽  
Emerging Market ◽  
Cash Flows ◽  
Indian Government ◽  
Firm Level ◽  
Content Type ◽  
Good Corporate Governance ◽  
Flow Manipulation

Purpose The purpose of this paper is to examine whether firm-level corporate governance measures and regulatory reforms constrain manipulation of operating cash flows, an important firm performance indicator. Design/methodology/approach The sample comprises firms from an emerging market, India, with data from 2005 to 2011. The authors use the methodology given in the paper by Lee (2012) and multiple regressions. Findings The authors find that cash flow manipulation is likely to increase with an increase in the controlling ownership. Furthermore, board diligence and better audit fail to curb such manipulation. However, the authors do find that such manipulation has gone down in the recent years, and diligent boards constrain it, possibly due to the recent steps taken by the Indian Government for improving the corporate governance environment in India. Practical implications The findings can act as feedback for the regulators and policy makers. Potential investors and analysts may also benefit from the study, since they can be more vigilant about the firms’ cash flow manipulation practices and can demand better governance. Originality/value The findings suggest that good corporate governance makes managers substitute earnings management with cash flow manipulation.

A behavioral perspective on corporate dividend policy: evidence from France

2019 ◽  
Vol 19 (1) ◽  
pp. 102-119 ◽  
Author(s):  
Dhoha Trabelsi ◽  
Saqib Aziz ◽  
Jean-Jacques Lilti
Keyword(s):  
Dividend Policy ◽  
Family Firms ◽  
Investor Sentiment ◽  
Large Data ◽  
Payout Policy ◽  
High Concentration ◽  
Data Set ◽  
Content Type ◽  
Family Control ◽  
Managerial Opportunism

PurposeThis paper empirically examines the catering theory of Baker and Wurgler (2004) in the particular context of France. Considering the characteristics of French market – known for its high concentration of capital – it attempts to highlight the role family control plays in the managerial tendencies to satisfy non-informative dividend demands.Design/methodology/approachThe paper focuses on a large data set of French firms included in the SBF-250 index over a period of 1992-2010. It uses a variety of dividend policy measures, including dividend premium, percentage of dividend-paying firms and probability of paying dividends. It adopts appropriate empirical specifications (time-series and probit models) to substantiate the research hypotheses.FindingsThe empirical findings show that the percentage of payers rises with the dividend premium, and that the dividend premium and the confidence index of French households are negatively correlated. This reflects the sensitivity of dividend demand to investor sentiment. Moreover, results of multivariate panel regression show a positive and statistically significant effect of the dividend premium on the firm’s tendency to pay, after controlling for firm characteristics. Finally, it finds that the dividend premium effect disappears in the case of family-controlled firms. This result is in line with the long-term orientation of family firms.Research limitations/implicationsThe study focuses on the dividend payment behavior of French firms. Although dividends are deeply engrained in France, authors believe that it will be interesting to look at the whole payout policy and particularly the role played by share repurchases.Practical implicationsAddressing short-term catering and managerial opportunism, the results of this study may be of interest for shareholders, potential investors and regulators.Originality/valueTo the best of the authors’ knowledge, this is the first study that provides empirical evidence on Baker and Wurgler (2004) catering theory by considering the particularity of French market where, unlike the US, percentage of dividend-paying firms is high and the corporate ownership structures are different.

Effects of personality on the efficacy of judgmental adjustments of statistical forecasts

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Cuneyt Eroglu ◽  
Nada R. Sanders
Keyword(s):  
Locus Of Control ◽  
Forecast Accuracy ◽  
Hierarchical Linear Model ◽  
Large Data ◽  
Openness To Experience ◽  
Organizational Setting ◽  
Data Set ◽  
Content Type ◽  
Judgmental Adjustments ◽  
The Impact

PurposeThe purpose of this paper is to investigate the effects of personality dimensions (conscientiousness, neuroticism, extraversion, agreeableness, openness to experience, locus of control) on the efficacy of judgmental adjustments of statistical forecasts.Design/methodology/approachThis paper uses a two-level hierarchical linear model to analyze a large data set obtained from an organizational setting (a quick service restaurant chain) that includes 3,812 judgmental adjustments of sales forecasts made by 112 store managers.FindingsThe results indicate that the average forecast accuracy improves as a result of judgmental adjustments, but performance of individual forecasters varies considerably based on their personality. Specifically, the trait of openness to experience tends to improve forecast accuracy while extraversion and external locus of control have negative effects.Originality/valueIntegration of human judgment with analytics algorithms is a major challenge for organizations. Documenting the impact of these traits on forecast accuracy opens the door for forecasting support system design, training, personnel selection and correction strategies that can be applied to judgmental adjustments.

scholarly journals The impact of corruption on analyst coverage

2019 ◽  
Vol 34 (3) ◽  
pp. 305-323
Author(s):  
Omaima Hassan ◽  
Gianluigi Giorgioni
Keyword(s):  
Negative Binomial ◽  
Firm Level ◽  
Data Set ◽  
Endogeneity Bias ◽  
Analyst Coverage ◽  
Content Type ◽  
Country Level ◽  
Data Limitations ◽  
Potential Benefits ◽  
The Impact

PurposeThis study aims to investigate the impact of country-level corruption and firms’ anti-bribery policies on analyst coverage. Analyst coverage has been identified as a powerful tool to detect fraud and should equally act as a possible tool to reduce corruption.Design/methodology/approachThis study used a negative binomial count regression method on a longitudinal data set of a sample of S&P Global 1200 companies for the years 2010-2015. To control for potential endogeneity bias and improve the reliability of the estimation, both country-level corruption and firms’ anti-bribery policies variables were instrumented.FindingsAfter controlling potential endogeneity bias, the results show that the adoption of anti-bribery policies at firm level attracts more analysts to follow a firm. The results for corruption at country level show that analyst coverage increases in less corrupted countries indicating that the costs of corruption exceed its potential benefits. When the variables corruption at country level and anti-bribery policies are interacted, the relationship is positive and highly significant.Practical implicationsGiven the potential important role played by anti-corruption measures, firms are encouraged to adopt them to reduce the incidence of corruption and to increase analyst coverage, which will reinforce the benign effect of monitoring.Originality/valueAlthough the literature on corruption at the country level is rich, it is geared towards the determinants of corruption in contrast to its consequences, and fewer studies have focused on the impact of corruption at firm level because of data limitations. This paper addresses this gap and contributes to the literature on the consequences of corruption at firm level.

Corporate governance and the impact to the R&D lab

2019 ◽  
Vol 13 (1) ◽  
pp. 91-110
Author(s):  
Arjan Markus ◽  
Tim Swift
Keyword(s):  
Corporate Governance ◽  
Competitive Advantage ◽  
Generalized Least Squares ◽  
Innovation Theory ◽  
Firm Level ◽  
Data Set ◽  
Content Type ◽  
Generalized Least Squares Estimation ◽  
The Impact ◽  
Exploratory Innovation

Purpose The purpose of this paper is to determine whether the strength of corporate governance influences the firm’s ability to retain their key knowledge workers or inventors. Design/methodology/approach This paper links agency and innovation theory to develop the hypotheses. Agency theory predicts that the interests of employees are counter to those of firm owners. The authors predict that as shareholder power grows as corporate governance strengthens, inventors who are highly productive, and those who pursue risky but valuable exploratory innovation will leave the firm. Given prior scholarship in innovation theory establishing the critical contributions that new knowledge creation and exploratory innovation make to firms’ competitive advantage, the authors consider whether stronger firm-level corporate governance leads to the erosion of the firm’s competitive advantage. The hypotheses are empirically tested using generalized least squares estimation on a data set that combines data on firms, their patents and the governance provisions these firms adopt. Findings Using a 10-year sample of publicly traded US firms, the authors find that stronger corporate governance erodes the very foundation of a firm’s innovation capabilities. Stronger corporate governance reduces management job security, which makes managers more risk-averse. This heightened “managerial myopia” results in increased departures of highly valuable inventors employed by the firm. The authors show that these departing inventors are more productive inventors than those who remain and engage in more exploratory R&D than the remaining inventors at the firm. Originality/value The findings raise questions on the appropriateness of the adoption of governance provisions strengthening shareholder rights in firms pursuing innovation.

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