Does dividend policy drive repurchases? An empirical study

2015 ◽  
Vol 42 (1) ◽  
pp. 13-22 ◽  
Author(s):  
Nan Liu ◽  
Jamshid Mehran
Keyword(s):  
Design Methodology ◽  
Substitution Effect ◽  
Payout Policy ◽  
Share Repurchases ◽  
Tobit Regression ◽  
Dividend Payout ◽  
Content Type ◽  
Dividend Policies ◽  
Investment Opportunities ◽  
Quarterly Dividend

Purpose – The purpose of this paper is to investigate whether firms repurchase shares to meet or just beat their dividend target as managers perceive share repurchases are more flexible than dividends and managers have a strong desire to maintain dividend levels and dividend payout ratio of the firms. Design/methodology/approach – The authors first run a Tobit regression to examine whether firms meeting or just beating the quarterly dividend per share threshold exhibit unusually high repurchases, controlling for the factors shown to affect repurchases. The authors then calculate abnormal repurchases and compare firms that would otherwise miss the benchmark with other firms. Findings – The authors find that firms meeting or just beating the quarterly dividend per share threshold repurchase more shares than other firms, after controlling for the substitution effect, investment opportunities and financial performance. In addition, firms otherwise missing the quarterly dividend per share threshold repurchase abnormally more shares to meet the threshold. Originality/value – The study contributes to the payout policy literature in the following ways. First, it extends the understanding of the association between dividend payout and repurchase. Second, it contributes to the threshold literature by showing that firms manipulate repurchases in addition to earnings to meet their quarterly dividend per share threshold. Third, it provides support to the survey evidence that firms have a strong desire to maintain their dividend policies.

scholarly journals The effect of family business professionalization on dividend payout

2017 ◽  
Vol 24 (4) ◽  
pp. 971-990 ◽  
Author(s):  
Anneleen Michiels ◽  
Lorraine Uhlaner ◽  
Julie Dekker
Keyword(s):  
Control Systems ◽  
Family Involvement ◽  
Family Business ◽  
Family Firms ◽  
Tobit Regression ◽  
Dividend Payout ◽  
Content Type ◽  
Dividend Policies ◽  
Governance Systems ◽  
Privately Held

Purpose The topic of dividend policies of private family-controlled firms has aroused the interest of corporate finance and governance scholars and practitioners alike. However, a lot of questions concerning the dividends in privately held family firms remain unanswered. The purpose of this paper is to examine whether a private family firm’s dividend payout is influenced by its degree of professionalization. Design/methodology/approach The hypotheses are tested on a sample of 492 small to medium-sized Belgian family-controlled businesses with Tobit regression models. Findings The results show that professionalized family-controlled firms pay higher dividends to their shareholders than do less-professionalized firms. In particular, the use of financial control systems, non-family involvement in governance systems, and the use of human resource control systems have a positive significant impact on the average level of dividend payout. Practical implications This study may be of interest to family business consultants and (potential) investors, as the results contradict the assumption that family businesses (especially those privately held) will always have a no or low dividend policy. Originality/value Investigating dividend payout in the context of other components than family ownership (in this case, professionalization) can broaden our understanding of dividend payout.

Litigation risk and payout policy

2020 ◽  
Vol 46 (11) ◽  
pp. 1391-1406
Author(s):  
James Malm ◽  
Srinidhi Kanuri
Keyword(s):  
Negative Relationship ◽  
Payout Policy ◽  
Business Community ◽  
Litigation Risk ◽  
Dividend Yield ◽  
Tobit Regression ◽  
Dividend Payout ◽  
Content Type ◽  
Regression Techniques ◽  
The Relationship

PurposeThe purpose of the paper is to examine the relationship between litigation risk and payout policy.Design/methodology/approachThe authors employ various regression techniques including probit, logit and tobit regression methodologies to study the relationship between litigation risk (contemporaneous measures, litigation dummy) and payout policy (dividend payout likelihood and dividend yield). The authors also conduct several robustness tests.FindingsThe authors find that firms involved in a lawsuit have a lower propensity to distribute dividends to shareholders. In particular, the authors document a negative relationship between litigation risk and payout policy as measured by dividend payout likelihood and dividend yield. The results are robust to a series of robustness tests including using alternate regression specifications, alternate measures of litigation and payout policy, a propensity-score matched sample and using an instrumental variable.Originality/valueThe paper identifies another determinant of payout policy and documents another avenue whereby legal institutions affect corporate payout policy. The link between litigation risk and payout policy is of interest to the business community, financial economists, management and the investing public.

Financial centers and dividend policy: evidence from an emerging market

2019 ◽  
Vol 58 (6) ◽  
pp. 1149-1163 ◽  
Author(s):  
Omar Farooq ◽  
Khondker Aktaruzzaman
Keyword(s):  
Design Methodology ◽  
Dividend Policy ◽  
Emerging Market ◽  
Information Environment ◽  
Tobit Regression ◽  
Analyst Coverage ◽  
Content Type ◽  
Dividend Policies ◽  
Financial Center ◽  
The Relationship

Purpose Is location in the financial center of a country significant determinant of a firm’s dividend policy? The purpose of this paper is to answer this question within the context of an emerging market. Design/methodology/approach The authors use variety of techniques (OLS regression, panel regression with random effects, TOBIT regression and quintile regression) to document the effect of location on dividend policies of Indian firms during the period between 2001 and 2016. Findings The results show significantly higher dividend payout ratios for firms headquartered in Mumbai, the main financial center of India. The results are robust for alternate proxy of dividend policy and for different sub-samples. The results also show that these results are more pronounced for firms with better information environment (firms with high analyst coverage). Originality/value To the best of the authors’ knowledge, most of the prior research overlooks how a location of firm’s headquarter in the financial center affects its dividend decisions. This paper fills this gap by documenting the relationship between the two in India.

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.

scholarly journals Corporate Payout Policy and CEO Compensation Structure

2018 ◽  
Vol 8 (2) ◽  
pp. 179
Author(s):  
Lee-Hsien Pan ◽  
Thomas Barkley ◽  
Shaio-Yan Huang
Keyword(s):  
Ceo Compensation ◽  
Payout Policy ◽  
Free Cash Flow ◽  
Share Repurchases ◽  
Negative Effects ◽  
Total Compensation ◽  
Dividend Payout ◽  
Leverage Ratio ◽  
Compensation Structure ◽  
Investment Projects

This paper examines how corporate payout policy is affected by CEO compensation structure using data from more than 1,600 firms during 1992-2006. Specifically, it studies the effects of CEO compensation structure, firm characteristics, and dividend payout policies on dividend type and relative dividend size.It finds CEO salary is positively associated with cash dividends, share repurchases, and relative dividend size whereas CEO salary (compared to bonus) as a percentage of total compensation has negative effects on cash dividends and share repurchases. It also discovers CEO stock awards as a percentage of total compensation are positively associated with share repurchases and CEO option awards are negatively related to cash dividends.In addition, this paper shows larger firms and firms with more free cash flow distribute more cash dividends and share repurchases. On the other hand, firms with higher leverage ratio and more investment opportunities prefer to save earnings for future re-investment projects. Finally, it show dividend payout policy (either cash dividends or share repurchases) increases relative dividend size. The results of this study suggest that CEO compensation components affect CEOs’ dividend payout decisions: when CEOs’ stock award increases, they prefer to use share repurchases; when CEOs’ option award increases, they prefer not to use cash dividends.

scholarly journals THE EFFECT OF AGENCY COSTS, OWNERSHIP STRUCTURE, SIGNALING, INVESTMENT OPPORTUNITIES, SIZE, FINANCIAL LEVERAGE, AND PROFITABILITY ON DIVIDEND POLICY OF COMPANIES LISTED IN INDONESIAN STOCK EXCHANGE

2021 ◽  
Vol 1 (2) ◽  
pp. 109-120
Author(s):  
Ferdi Nusaputra ◽  
Sautma Ronni Basana
Keyword(s):  
Ownership Structure ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Agency Cost ◽  
Tobit Regression ◽  
Financial Leverage ◽  
Public Companies ◽  
Dividend Policies ◽  
Entire List ◽  
Investment Opportunities

The purpose of this research is to determine the effect of agency cost, ownership structure, signaling, investment opportunities, size, financial leverage, and profitability on dividend policies on public companies listed on the Indonesian Stock Exchange (IDX) period 2014 - 2019. This research sample uses the entire list of companies listed on the Indonesian Stock Exchange period 2014 - 2019. The data analysis method used is tobit regression. The results of this research analysis suggest that agency cost, ownership, investment opportunities, size, financial leverage, and profitability have a significant effect on dividend policy on companies listed in IDX period 2014 - 2019.

scholarly journals Uncovering the effects of prior founding experience of entrepreneurs on early board selection

2020 ◽  
Vol 14 (3) ◽  
pp. 263-274
Author(s):  
Laura Gasiorowski ◽  
Ahreum Lee
Keyword(s):  
Human Capital ◽  
Design Methodology ◽  
New Ventures ◽  
Computer Software ◽  
Board Members ◽  
Tobit Regression ◽  
Content Type ◽  
Selection Behavior ◽  
Novice Entrepreneurs ◽  
Technology Industries

Purpose This study aims to show what type of directors founders (or entrepreneurs) first appoint to the board and how these appointments differ across experienced and novice entrepreneurs. Design/methodology/approach The sample consists of the human capital of board members in 443 new ventures in the computer software and information technology industries between 2000 and 2014. The hypotheses were tested using tobit regression. Findings The findings in this study reveal that compared to novice entrepreneurs, experienced entrepreneurs tend to appoint early boards with greater human capital (entrepreneurial, technical/scientific and industry-specific) and with greater functional diversity. In contrast, novice entrepreneurs tend to appoint early boards with greater finance and director experience. Originality/value The value of this research lies in filling the gap in the current literature by comparing the board appointment/selection behavior of novice and experienced entrepreneurs, which is relatively underexplored.

Determinants of dividend policy: evidence from an emerging and developing market

2019 ◽  
Vol 45 (3) ◽  
pp. 413-429 ◽  
Author(s):  
N. Jayantha Dewasiri ◽  
Weerakoon Banda Yatiwelle Koralalage ◽  
Athambawa Abdul Azeez ◽  
P.G.S.A. Jayarathne ◽  
Duminda Kuruppuarachchi ◽  
...  
Keyword(s):  
Dividend Policy ◽  
State Ownership ◽  
Free Cash Flow ◽  
Future Research ◽  
Dividend Yield ◽  
Short Term ◽  
Dividend Payout ◽  
Content Type ◽  
Investment Opportunities ◽  
Propensity To Pay

PurposeThe purpose of this paper is to identify the determinants of dividend policy in an emerging and developing market.Design/methodology/approachThe study employs a quantitative approach using 191 Sri Lankan firms and 1,337 firm-year observations as the sample. The authors apply a Binary Logistic Regression model to uncover the determinants of the propensity to pay dividends, and a Fixed Effect Panel Regression to investigate the determinants of dividend payout.FindingsThe authors identify past dividend decision, earnings, investment opportunities, profitability, free cash flow (FCF), corporate governance, state ownership, firm size and industry influence as the key determinants of propensity to pay dividends. In addition past dividends, investment opportunities, profitability and dividend premium are identified as the determinants of dividend payout. Moreover, there is a feedback between dividend yield and profitability in one lag and between dividend yield and dividend premium in two lags, as short-term relationships. Hence, past dividend decision or payout, profitability and investment opportunities are a common set of determinants with implications for both propensity to pay dividends and its payout. The findings support theories of dividends such as signaling, outcome, catering, life cycle, FCF and pecking order.Practical implicationsThe findings are important for investors, managers and future research. Investors should focus on the determinants identified by our study when making investment decisions whereas managers should practice the same when formulating appropriate dividend policies for their firms. Future research should rely on propensity to pay dividends and its payout simultaneously to promote a theoretical consensus on the dividend determinant puzzle.Originality/valueThis is the first study that investigates determinants of propensity to pay dividends and dividend payout along with short-term relationships in a single study.

The stability of dividends and its predictability: a cross-country analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rajesh Pathak ◽  
Ranjan Das Gupta
Keyword(s):  
Robustness Analysis ◽  
Least Square ◽  
Tobit Regression ◽  
Economic Cycle ◽  
Dividend Payout ◽  
Content Type ◽  
Country Analysis ◽  
Economic State ◽  
Changing Times ◽  
The Stability

PurposeThe authors examine the stability of dividend payout and the consistency in its predictability using sample of firms from 18 different countries amid their prevailing heterogeneous formal institutions (such as the legal system, corporate governance), the distinct state of economic development (developing vs developed) and changing times (during the crisis vs the noncrisis periods).Design/methodology/approachThe authors use tobit regression models with distinct specifications for the authors’ investigations. The authors alternately analyze the study’s results using Fama–Macbeth (FM) (1973) and generalized least square (GLS) regressions.FindingsThe authors show a sharply declining stability in dividend payout with time using DeAngelo and Roll’s (2015) framework. In terms of predictive consistency, the authors report that only a few idiosyncratic factors predict dividends consistently, and these results hold qualitatively true across the robustness analysis. The firm's liquidity appears to be the most consistent predictor of dividends payout, whereas firm's size being on the other extreme. The results signify that the idiosyncratic factors that matter for firm's dividend policy are not country specific. Instead, it reveals commonality of predictors grounded on characteristics of countries such as legal environment, investor's protection, economic state (ES) and economic cycle.Originality/valueThe authors contribute to the dividends literature by providing the evidence of dividend instability through time and disapproving the stylized fact of sticky dividends. Besides, the authors provide international evidence of inconsistent predictability of dividends.

Measuring operational efficiency of isolation hospitals during COVID-19 pandemic using data envelopment analysis: a case of Egypt

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mahmoud Abdelrahman Kamel ◽  
Mohamed El-Sayed Mousa
Keyword(s):  
Data Envelopment Analysis ◽  
Design Methodology ◽  
Operational Efficiency ◽  
Data Envelopment ◽  
Allocation Of Resources ◽  
Tobit Regression ◽  
Health Crisis ◽  
Content Type ◽  
Dea Analysis ◽  
Using Data

PurposeThis study used Data Envelopment Analysis (DEA) to measure and evaluate the operational efficiency of 26 isolation hospitals in Egypt during the COVID-19 pandemic, as well as identifying the most important inputs affecting their efficiency.Design/methodology/approachTo measure the operational efficiency of isolation hospitals, this paper combined three interrelated methodologies including DEA, sensitivity analysis and Tobit regression, as well as three inputs (number of physicians, number of nurses and number of beds) and three outputs (number of infections, number of recoveries and number of deaths). Available data were analyzed through R v.4.0.1 software to achieve the study purpose.FindingsBased on DEA analysis, out of 26 isolation hospitals, only 4 were found efficient according to CCR model and 12 out of 26 hospitals achieved efficiency under the BCC model, Tobit regression results confirmed that the number of nurses and the number of beds are common factors impacted the operational efficiency of isolation hospitals, while the number of physicians had no significant effect on efficiency.Research limitations/implicationsThe limits of this study related to measuring the operational efficiency of isolation hospitals in Egypt considering the available data for the period from February to August 2020. DEA analysis can also be an important benchmarking tool for measuring the operational efficiency of isolation hospitals, for identifying their ability to utilize and allocate their resources in an optimal manner (Demand vs Capacity Dilemma), which in turn, encountering this pandemic and protect citizens' health.Originality/valueDespite the intensity of studies that dealt with measuring hospital efficiency, this study to the best of our knowledge is one of the first attempts to measure the efficiency of hospitals in Egypt in times of health' crisis, especially, during the COVID-19 pandemic, to identify the best allocation of resources to achieve the highest level of efficiency during this pandemic.

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