Dividend policy following mergers and acquisitions: US evidence

2016 ◽  
Vol 42 (11) ◽  
pp. 1073-1090 ◽  
Author(s):  
Sébastien Dereeper ◽  
Aymen Turki
Keyword(s):  
Mergers And Acquisitions ◽  
Dividend Policy ◽  
Dividend Yield ◽  
Target Firm ◽  
Content Type ◽  
Dividend Policies ◽  
Target Firms ◽  
Acquisition Announcements ◽  
New Evidence ◽  
Practical Implications

Purpose The purpose of this paper is to address whether the past dividend policy of target firm impacts dividend policies following US mergers and acquisitions (M&A). Design/methodology/approach The authors use the catering theory as a theoretical approach to test dividend change after a merger-acquisition. For the empirical design, dividend policy is captured using dividend status, payout ratio and dividend yield, and specifications are estimated using Probit and OLS models. Findings The data indicate that dividend policy of the target affects dividend policy of the combined entity in cases of stock-based deals. This result provides support for catering theory, which maintains that managers of acquirers adjust dividend policies following transactions to cater to target shareholders’ preferences. Research limitations/implications Although the tests suggest significant results using dividend status and payout ratio as measures of dividend, the authors do not find a similar effect for dividend yield. Practical implications Financial analysts evaluating merger-acquisition announcements may wish to predict the dividend policy following stock-based deals as they project the likely impact of past dividend policies of target firms. The results are also likely to be useful to investors. Originality/value The paper presents new evidence about dividend policy following M&A. To the authors’ knowledge, this is the first study that examines how an acquirer’s dividend policy is affected by an acquisition.

Institutional perspectives of dividend policy in India

2018 ◽  
Vol 10 (3) ◽  
pp. 324-342 ◽  
Author(s):  
H. Kent Baker ◽  
Sujata Kapoor ◽  
Imad Jabbouri
Keyword(s):  
Institutional Investors ◽  
Dividend Policy ◽  
Mail Survey ◽  
Active Monitoring ◽  
Content Type ◽  
Dividend Policies ◽  
Dividend Payments ◽  
New Evidence ◽  
Level Of Importance ◽  
Practical Implications

Purpose This study aims to examine dividend policy from the perspective of institutional investors in India. It focuses on the level of importance these investors attach to the dividend policy of their investee firms, the level of influence they exercise in shaping such firms’ dividend policies and their reactions to changes in dividends. This study also reports how institutional investors view various explanations for paying dividends. Design/methodology/approach A mail survey provides a profile of respondents and their firms, as well as responses to 29 closed-ended questions involving various explanations for paying dividends and 22 closed-ended questions on various dividend issues. Findings The evidence shows that Indian institutional investors attach substantial importance to dividend policy and prefer high dividend payments. Their reactions to dividend changes are asymmetric. Taxes are a major driver for why they seek dividends, whereas liquidity needs to play little role in shaping their preferences. The two most commonly used methods of active monitoring are selling shares and communicating concerns to investee companies. Research limitations/implications The number of responses limits the ability to test for statistically significant differences between the various competing hypotheses. Practical implications The findings support multiple explanations for paying cash dividends and provide new evidence supporting the positive relation between inflation and dividend payments. Originality/value This study provides the first survey evidence on the views of institutional investors on dividend policy in India.

Corporate dividend policy revisited

2015 ◽  
Vol 41 (2) ◽  
pp. 126-144 ◽  
Author(s):  
H. Kent Baker ◽  
Rob Weigand
Keyword(s):  
Dividend Policy ◽  
Payout Policy ◽  
Future Research ◽  
Stylized Facts ◽  
Content Type ◽  
Dividend Policies ◽  
Popular View ◽  
The Stability ◽  
Practical Implications ◽  
Over Time

Purpose – The purpose of this paper is to provide an overview and synthesis of some important literature on dividend policy, chronicle changing perspectives and trends, provide stylized facts, offer practical implications, and suggest avenues for future research. Design/methodology/approach – The authors provide a survey of literature surveys with a focus on insights for paying cash dividends. Findings – The analysis of literature surveys on dividend policy provides some stylized facts. For example, US evidence indicates that the importance of cash dividends as a part of investors’ total returns has declined over time. Share repurchases now play an increasingly important role in payout policy in countries permitting stock buybacks. The popular view is that dividend policy is important, as evidenced by the large amount of money involved and the attention that firms, security analysts, and investors give to dividends. Firms tend to follow a managed dividend policy rather than a residual dividend policy, which involves paying dividends from earnings left over after meeting investment needs while maintaining its target capital structure. Certain determinants of cash dividends are consistently important over time in shaping actual dividend policies including the stability of past dividends and current and anticipated earnings. No universal set of factors is appropriate for all firms because dividend policy is sensitive to numerous factors including firm characteristics, market characteristics, and substitute forms of dividends. Universal or one-size-fits-all theories or explanations for why companies pay dividends are too simplistic. Practical implications – The dividend puzzle remains an important topic in modern finance. Originality/value – This is the first a survey of literature surveys on cash dividends.

How Moroccan institutional investors view dividend policy

2017 ◽  
Vol 43 (12) ◽  
pp. 1332-1347 ◽  
Author(s):  
H. Kent Baker ◽  
Imad Jabbouri
Keyword(s):  
Institutional Investors ◽  
Stock Prices ◽  
Dividend Policy ◽  
Stock Exchange ◽  
Mail Survey ◽  
High Response Rate ◽  
Content Type ◽  
Listed Firms ◽  
Dividend Policies ◽  
Dividend Payments

Purpose The purpose of this paper is to examine how Moroccan institutional investors view dividend policy. It discusses the importance these investors attach to the dividend policy of their investee firms, how much influence they exercise in shaping investee firms’ dividend policies, their reactions to changes in dividends, and their views on various explanations for paying dividends. Design/methodology/approach A mail survey provides a respondent and firm profile and responses to 28 questions involving various explanations for paying dividends and 30 questions on different dividend issues. Findings Institutional investors attach substantial importance to dividend policy and prefer high dividend payments. Although liquidity needs are a major driver, taxes play little role in shaping dividend preferences. Respondents agree with multiple explanations for paying dividends giving the strongest support to catering, bird-in-the-hand, life cycle, signaling, and agency theories. Research limitations/implications Despite a high response rate, the number of respondents limits partitioning the sample and testing for significant differences between different groups. Practical implications The lack of communication between Casablanca Stock Exchange (CSE) listed firms and institutional investors may depress stock prices and increase volatility. The results suggest agency problems and a weak governance environment at the CSE. Originality/value This study documents the importance that institutional investors place on dividend policy, their reactions to changes in their investees’ dividend policy, and the methods used to influence these firms. It extends previous research by reporting the level of support Moroccan institutional investors give to various explanations for paying dividends.

scholarly journals Religion, national culture and cross-country differences in the use of trade credit

2019 ◽  
Vol 15 (3) ◽  
pp. 350-370
Author(s):  
Markus Mättö ◽  
Mervi Niskanen
Keyword(s):  
Cultural Values ◽  
National Culture ◽  
Trade Credit ◽  
Cultural Dimensions ◽  
Firm Level ◽  
Content Type ◽  
Cross Country ◽  
New Evidence ◽  
The Relationship ◽  
Practical Implications

Purpose The purpose of this paper is to investigate whether religion or national culture can explain previously observed cross-country variation in trade credit. Design/methodology/approach Using the firm-level SME data from 35 European countries, religion and cultural factors of Hofstede and Schwartz, the authors provide new evidence on the determinants of the cross-country variation in trade credit. Findings The results indicate that religion and national culture are associated with trade credit. The authors find that the levels of trade credit are higher in Catholic countries than in Protestant ones and that peoples’ religiousness has an impact on trade credit only in Catholic countries. The authors also find that Hofstede’s cultural dimensions, such as power distance and uncertainty avoidance, are positively associated with trade credit. Practical implications Overall, authors’ findings indicate that religion and national culture are important determinants of trade credit management, and that the association between commonly used cultural values and trade credit depends on the religious, legal, and financial environment. Originality/value To the best of authors’ knowledge, this is the first study to research the relationship between national culture and trade credit.

The core potential of mergers and acquisitions to boost profits and research and development innovation

2018 ◽  
Vol 34 (11) ◽  
pp. 14-16
Keyword(s):  
Mergers And Acquisitions ◽  
Knowledge Creation ◽  
Design Methodology ◽  
Reading Time ◽  
Acquisition Time ◽  
Content Type ◽  
The Core ◽  
Pertinent Information ◽  
Time Frames ◽  
Practical Implications

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings This research paper concentrates on how M&As deliver increased profits and R&D intensity across varying post-acquisition time frames. The human mechanics beneath these achievements reveal that savvy knowledge creation and integration is crucial for extracting lasting value from an M&A. Originality/value The briefing saves busy executives, strategists and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

The shape of income distribution and decomposition of the changes in income inequality in India

2019 ◽  
Vol 46 (3) ◽  
pp. 760-776 ◽  
Author(s):  
Aswini Kumar Mishra ◽  
Anil Kumar ◽  
Abhishek Sinha
Keyword(s):  
Income Inequality ◽  
Research Work ◽  
Income Growth ◽  
Analysis Tool ◽  
Distribution Analysis ◽  
Content Type ◽  
Income Distributions ◽  
The Rich ◽  
New Evidence ◽  
Practical Implications

Purpose Though Indian economy since 1980s has expanded very rapidly, yet the benefits of growth remain very unequally distributed. The purpose of this paper is to provide new evidence about the shape, intensity and decomposition of inequality change between 2005 and 2012. The authors find that Gini, as a measure of income inequality, has increased irrespective of geographic regions. Design/methodology/approach Based on a recent distribution analysis tool, “ABG,” the paper focuses on local inequality, and summarizes the shape of inequality in terms of three inequality parameters (α, β and γ) to examine how the income distributions have changed over time. Here, the central coefficient (α) measures inequality at the median level, with adjustment parameters at the top (β) and bottom (γ). Findings The results reveal that at the middle of distribution (α), there is almost the same inequality in both the periods, but the coefficients on the curvature parameters β and γ show that there is increasing inequality in the subsequent period. Finally, an analysis of decomposition of inequality change suggests that though income growth was progressive, however, this equalizing effect was more than offset by the disequalizing effect of income reranking. Research limitations/implications This paper shows how it can be possible both for “the poor” to fare badly relatively to “the rich” and for income growth to be pro-poor. Practical implications This paper stresses the significance of inequality reduction. Social implications Inequality reduction is very much imperative in ending poverty and boosting shared prosperity. Originality/value Perhaps, this research work is first of its kind to examine the shape and decomposition of change in income inequality in India in recent years.

Strategic look at making M & A less risky

2016 ◽  
Vol 32 (2) ◽  
pp. 23-25
Keyword(s):  
Mergers And Acquisitions ◽  
Design Methodology ◽  
Reading Time ◽  
Decision Processes ◽  
Theory And Practice ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Content Type ◽  
Pertinent Information ◽  
Practical Implications

Purpose – This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach – This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings – Mergers and acquisitions strategies are not risk-free. Potential problems include integration difficulties, inadequate evaluation of target, inability to achieve synergy and complexity. The theory and practice of strategic decision-making need to take into account both economically rational and intuitive decision processes. Practical implications – The paper provides strategic insights and practical thinking that have influenced some of the world’s leading organizations. Originality/value – The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

DuPont analysis and dividend policy: empirical evidence from Malaysia

2018 ◽  
Vol 30 (1) ◽  
pp. 52-72
Author(s):  
Samuel Jebaraj Benjamin ◽  
Zulkifflee Bin Mohamed ◽  
M. Srikamaladevi Marathamuthu
Keyword(s):  
Design Methodology ◽  
Dividend Policy ◽  
Explanatory Power ◽  
Return On Assets ◽  
Policy Studies ◽  
Content Type ◽  
Market Participants ◽  
Dupont Analysis ◽  
Asset Turnover ◽  
Practical Implications

Purpose The purpose of this paper is to investigate the informativeness of asset turnover (ATO) and profit margin (PM) of the DuPont analysis in explaining dividend policy. Design/methodology/approach Annual financial data from Compustat for the period 2004-2009 were used to analyze a sample of Malaysian firms. Findings This study finds both PM and ATO to strongly explain contemporaneous dividends. The decomposition of return on net operating assets (RNOA) into PM and ATO also improves the explanatory power of dividends. The results of the predictive model show that PM and ATO are useful in predicting the propensity of firms to pay dividends. The results of the change dividend model, however, do not provide any significant results for PM and ATO. Practical implications Understanding the influence of ATO and PM on dividends could enable managers to realize the importance of these factors when making dividend policy decisions. Other market participants, such as financial analysts and lenders, could also recognize the empirical specifics related to decomposing the profitability measure into its two components, one measuring the asset efficiency and the other measuring the profitability per unit of product, in the context of dividend policy. Originality/value This study extends the empirical specifics of prior dividend policy studies by decomposing the popular profitability measure of return on assets into its two components of PM and ATO.

The role of toeholds on asymmetric information in mergers and acquisitions

2017 ◽  
Vol 34 (2) ◽  
pp. 260-280
Author(s):  
Sebouh Aintablian ◽  
Wissam El Khoury ◽  
Zouhaier M’Chirgui
Keyword(s):  
Asymmetric Information ◽  
Mergers And Acquisitions ◽  
Intangible Assets ◽  
Negative Relationship ◽  
Multinomial Logit Model ◽  
Target Firm ◽  
Content Type ◽  
Tender Offers ◽  
Asymmetry Of Information

Purpose This paper aims to examine empirically the role of toeholds in reducing asymmetric information in mergers and acquisitions by establishing a relationship between the toehold and some relevant characteristics of the acquiring and the target firm. Design/methodology/approach A regression analysis is conducted to examine the relation between the dependent variable (the toehold) and a set of independent variables. A multinomial logit model is used to test for the occurrence of toeholds. A probit selection model and two-step Heckman correction tests are used to correct the data and to check for robustness of the results. Findings The regression results for acquisitions with prior toeholds are consistent with the studied hypotheses that asymmetric information is more observed in foreign acquisitions, in different industries, with tender offers and with higher levels of intangible assets. A negative relationship is found between toehold size and the number of competing bidders. Originality/value Consistent with previous literature, the study finds that majority of bidders abstain from purchasing a toehold before entering a bid contest. The study also emphasizes the role of intangible assets in assessing the efficacy of toeholds under asymmetric information. The ratio of target intangible assets to target total serves as a proxy for asymmetric information. Regression results are consistent with the hypotheses that asymmetry of information is observed when the acquiring and the target firm operate in different countries and industries.

scholarly journals The Urge to Merge: The Role of Governance Structures in Mergers and Acquisitions

1970 ◽  
Vol 13 (2) ◽  
pp. 151-166
Author(s):  
Catherine Daily ◽  
Dan Dalton
Keyword(s):  
Decision Making ◽  
Mergers And Acquisitions ◽  
Board Of Directors ◽  
Board Composition ◽  
Outside Directors ◽  
Target Firm ◽  
Target Firms ◽  
The Board Of Directors ◽  
The Relationship

The 1990s have witnessed merger and acquisition activity which rivals that of the 1980s "merger mania." As firms continue to consolidate either within industries or across industries it is appropriate to investigate those aspects of a target firm which might attract a bidder. The board of directors, a central decision-making body in the corporation, may provide insights into this process. This study investigates the relationship between board composition and size and the incidence of a firm being targeted for a merger or acquisition. Results of a logistic regression analysis of a matched set of target firms and firms not targeted for merger or acquisition reveal that target firms have higher proportions of independent outside directors and more total numbers of directors. Moreover, we find that target firms have greater exposure to institutional investors.

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