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Dividend Payments (dividend + payment)
Selected AbstractsDividend payments in the classical risk model under absolute ruin with debit interestAPPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY, Issue 3 2009Chunwei Wang Abstract This paper attempts to study the dividend payments in a compound Poisson surplus process with debit interest. Dividends are paid to the shareholders according to a barrier strategy. An alternative assumption is that business can go on after ruin, as long as it is profitable. When the surplus is negative, a debit interest is applied. At first, we obtain the integro-differential equations satisfied by the moment-generating function and moments of the discounted dividend payments and we also prove the continuous property of them at zero. Then, applying these results, we get the explicit expressions of the moment-generating function and moments of the discounted dividend payments for exponential claims. Furthermore, we discuss the optimal dividend barrier when the claim sizes have a common exponential distribution. Finally, we give the numerical examples for exponential claims and Erlang (2) claims. Copyright © 2008 John Wiley & Sons, Ltd. [source] Earnings Quality and the Equity Risk Premium: A Benchmark Model,CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2006Kenton K. Yee Abstract This paper solves a model that links earnings quality to the equity risk premium in an infinite-horizon consumption capital asset pricing model (CAPM) economy. In the model, risk-averse traders hold diversified portfolios consisting of risk-free bonds and shares of many risky firms. When constructing their portfolios, traders rely on noisy reported earnings and dividend payments for information about the risky firms. The main new element of the model is an explicit representation of earnings quality that includes hidden accrual errors that reverse in subsequent periods. The model demonstrates that earnings quality magnifies fundamental risk. Absent fundamental risk, poor earnings quality cannot affect the equity risk premium. Moreover, only the systematic (undiversified) component of earnings-quality risk contributes to the equity risk premium. In contrast, all components of earnings-quality risk affect earnings capitalization factors. The model ties together consumption CAPM and accounting-based valuation research into one price formula linking earnings quality to the equity risk premium and earnings capitalization factors. [source] The Impact of Managerial Entrenchment on Agency Costs: An Empirical Investigation Using UK Panel DataEUROPEAN FINANCIAL MANAGEMENT, Issue 3 2009Chrisostomos Florackis G3; G32 Abstract This paper empirically investigates the relationship between managerial entrenchment and agency costs for a large sample of UK firms over the period 1999,2005. To measure managerial entrenchment, we use detailed information on ownership and board structures and managerial compensation. We develop a managerial entrenchment index, which captures the extent to which managers have the ability and incentives to expropriate wealth from shareholders. Our findings, which are based on a dynamic panel data analysis, show that there is a strong negative relationship between managerial entrenchment and our inverse proxy for agency costs, namely asset turnover ratio. There is also evidence that short-term debt and dividend payments work as effective corporate governance devices for UK firms. Finally, our findings reveal that agency costs are persistent over time. The results are robust to a number of alternative specifications, including varying measures of managerial entrenchment and agency costs. [source] The Effect of Fiduciary Standards on Institutions' Preference for Dividend-Paying StocksFINANCIAL MANAGEMENT, Issue 4 2008Kristine Watson Hankins Many researchers apparently believe that some institutional investors prefer dividend-paying stocks because they are subject to the "prudent man" (PM) standard of fiduciary responsibility, under which dividend payments provide prima facie evidence that an investment is prudent. Although this was once accurate for many institutions, during the 1990s most states replaced the PM standard with the less-stringent "prudent investor" (PI) rule, which evaluates the appropriateness of each investment in a portfolio context. Controlling for the general decline in dividend-paying stocks, we find that institutions reduced their holdings of dividend-paying stocks by 2% to 3% as the PI standard spread during the 1990s. Studies of asset pricing and corporate governance should no longer consider dividend payments when evaluating the actions of institutional investors. [source] Corporate Cash Policy and How to Manage it with Stock RepurchasesJOURNAL OF APPLIED CORPORATE FINANCE, Issue 3 2008Amy Dittmar At the end of 2004 total U.S. corporate cash holdings reached an all-time high of just under $2 trillion,an amount equal to roughly 15% of the total U.S. GDP. And during the past 25 years, average cash holdings have jumped from 10% to 23% of total corporate assets. But at the same time their levels of cash have risen, U.S. companies have paid out dramatically increasing amounts of cash to buy back shares. This article addresses the following questions: What accounts for the dramatic increase in the average level of corporate cash holdings since 1980? And why do some companies keep so much cash (with one fourth of U.S. firms holding cash amounting to at least 36% of total assets) while others have so little (with another quarter having less than 3%)? Why do companies pay out excess cash in the form of stock repurchases (rather than, say, dividends), and what explains the significant increase in repurchases (both in absolute terms and relative to dividends) over time? The author begins by arguing that cash reserves provide companies with a buffer against possible shortfalls in operating profits,one that, especially during periods of financial trouble, can be used to avoid financial distress or provide funding for promising projects that might otherwise have to be put off. Such buffers are particularly valuable in the case of smaller, riskier companies with lots of growth opportunities and limited access to capital markets. And the dramatic increase in corporate cash holdings between 1980 and the present can be attributed mainly to an increase in the risk of publicly traded companies,an increase in risk that reflects in part a general increase in competition, but also a notable change over time in the kinds of companies (smaller, newer, less profitable, non-dividend paying firms) that have chosen to go public. At the other end of the corporate spectrum are large, relatively mature companies with limited growth opportunities. Although such companies tend to produce considerable free cash flow, they also tend to retain relatively small amounts of cash (as a percentage of total assets), in part because of shareholder concern about the corporate "free cash flow problem",the well-documented tendency of such companies to destroy value through overpriced (often diversifying) acquisitions and other misguided attempts to pursue growth at the expense of profitability. For companies with highly predictable earnings and investment plans, dividends provide one means of addressing the free cash flow problem. But for companies with more variable earnings and less predictable reinvestment, open-market stock repurchases provide a more flexible means of distributing cash to shareholders. Unlike the corporate "commitment" implied by dividend payments, an open market stock repurchase program creates what amounts to an option but not an obligation to distribute funds. The value of such flexibility, which increases during periods of increased risk and uncertainty, explains much of the apparent substitution of repurchases for dividends in recent years. [source] DISAPPEARING DIVIDENDS: CHANGING FIRM CHARACTERISTICS OR LOWER PROPENSITY TO PAY?JOURNAL OF APPLIED CORPORATE FINANCE, Issue 1 2001Eugene F. Fama The proportion of U.S. firms paying dividends drops sharply during the 1980s and 1990s. Among NYSE, AMEX, and Nasdaq firms, the proportion of dividend payers falls from 66.5% in 1978 to only 20.8% in 1999. The decline is due in part to an avalanche of new listings that tilts the population of publicly traded firms toward small firms with low profitability and strong growth opportunities,the timeworn characteristics of firms that typically do not pay dividends. But this is not the whole story. The authors' more striking finding is that, no matter what their characteristics, firms in general have become less likely to pay dividends. The authors use two different methods to disentangle the effects of changing firm characteristics and changing propensity to pay on the percent of dividend payers. They find that, of the total decline in the proportion of dividend payers since 1978, roughly one-third is due to the changing characteristics of publicly traded firms and two-thirds is due to a reduced propensity to pay dividends. This lower propensity to pay is quite general,dividends have become less common among even large, profitable firms. Share repurchases jump in the 1980s, and the authors investigate whether repurchases contribute to the declining incidence of dividend payments. It turns out that repurchases are mainly the province of dividend payers, thus leaving the decline in the percent of payers largely unexplained. Instead, the primary effect of repurchases is to increase the already high payouts of cash dividend payers. [source] FINANCIAL STRATEGY FOR MIDDLE MARKET COMPANIES: a ROUNDTABLE DISCUSSIONJOURNAL OF APPLIED CORPORATE FINANCE, Issue 4 2000Article first published online: 5 APR 200 Dennis Soter begins with the provocative observation that "U.S. companies, private as well as public, are systematically underleveraged," and goes on to suggest that debt-financed stock repurchases may help address the current valuation problems faced by many middle market companies (and by many larger firms in basic industries as well). Soter makes his case by presenting two case histories. In the first, Equifax, the Atlanta-based provider of credit information services, combined a leveraged Dutch auction stock repurchase with a multi-year series of open market repurchase programs and an EVA incentive plan to produce large increases in operating efficiency and shareholder value. In the second, FPL Group (the parent of Florida Power and Light) became the first profitable utility to cut its dividend, substituting a policy of ongoing stock repurchase for its 33% reduction in dividend payments. Following Soter, John Brehm, the CFO of IPALCO Enterprises (the parent of Indianapolis Power and Light), explains the rationale for his company's decision to become the first utility to do a leveraged recap (while also cutting its dividend by a third). As in the case of Equifax, IPALCO's dramatic change in capital structure (also combined with an EVA incentive plan) was associated with major operating improvements and a positive stock market response. But, of course, high leverage is not right for all companies. And, to reinforce that point, James Perry, CEO of Argosy Gaming, recounts his harrowing experience of having to raise new equity shortly after taking charge of his overleveraged company. By arranging an infusion of convertible preferred, Argosy was able not only to stave off bankruptcy, but to fund major new investment and engineer a remarkable turnaround of its operations. Finally, William Dutmers, Chairman of Knape & Vogt, a small midwestern manufacturing company, discusses the role of debt-financed stock repurchases and an EVA management approach in his company's recent operating improvements. [source] The Ex,Dividend Pricing of REITsREAL ESTATE ECONOMICS, Issue 4 2002William G. Hardin III Past studies have shown that ex,dividend stock prices are not fully reflective of dividend payments. A tax,induced clientele effect and micromarket limitations in stock pricing have been used to explain this pricing anomaly. This study focuses on the ex,dividend behavior of real estate investment trusts (REITs). Due to a low correlation between dividend size and dividend yield, REITs permit a cleaner examination of a tax,induced clientele effect. The results indicate that tick constraints in pricing ex,dividend stocks create the appearance of a tax,induced clientele effect in REITs when none should exist. [source] A Theory of Dividends Based on Tax ClientelesTHE JOURNAL OF FINANCE, Issue 6 2000Franklin Allen This paper explains why some firms prefer to pay dividends rather than repurchase shares. When institutional investors are relatively less taxed than individual investors, dividends induce "ownership clientele" effects. Firms paying dividends attract relatively more institutions, which have a relative advantage in detecting high firm quality and in ensuring firms are well managed. The theory is consistent with some documented regularities, specifically both the presence and stickiness of dividends, and offers novel empirical implications, e.g., a prediction that it is the tax difference between institutions and retail investors that determines dividend payments, not the absolute tax payments. [source] Order imbalance and the pricing of index futuresTHE JOURNAL OF FUTURES MARKETS, Issue 7 2007Joseph K.W. Fung This study examines whether the aggregate order imbalance for index stocks can explain the arbitrage spread between index futures and the underlying cash index. The study covers the period of the Asian financial crisis and includes wide variations in order imbalance and the indexfutures basis. The analysis controls for realistic trading costs and actual dividend payments. The results indicate that the arbitrage spread is positively related to the aggregate order imbalance in the underlying index stocks; negative order-imbalance has a stronger impact than positive order imbalance. Violations of the upper no-arbitrage bound are related to positive order imbalance; of the lower no-arbitrage bound to negative order imbalance. Asymmetric response times to negative and positive spreads can be attributed to the difficulty, cost, and risk of short stock arbitrage when the futures are below their no-arbitrage value. The significant relationship between order imbalance and arbitrage spread confirms that index arbitrageurs are important providers of liquidity in the futures market when the stock market is in disequilibrium. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:697,717, 2007 [source] Dividend payments in the classical risk model under absolute ruin with debit interestAPPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY, Issue 3 2009Chunwei Wang Abstract This paper attempts to study the dividend payments in a compound Poisson surplus process with debit interest. Dividends are paid to the shareholders according to a barrier strategy. An alternative assumption is that business can go on after ruin, as long as it is profitable. When the surplus is negative, a debit interest is applied. At first, we obtain the integro-differential equations satisfied by the moment-generating function and moments of the discounted dividend payments and we also prove the continuous property of them at zero. Then, applying these results, we get the explicit expressions of the moment-generating function and moments of the discounted dividend payments for exponential claims. Furthermore, we discuss the optimal dividend barrier when the claim sizes have a common exponential distribution. Finally, we give the numerical examples for exponential claims and Erlang (2) claims. Copyright © 2008 John Wiley & Sons, Ltd. [source] Privatization in Canada: Operating and Stock Price Performance with International ComparisonsCANADIAN JOURNAL OF ADMINISTRATIVE SCIENCES, Issue 2 2002Anthony E. Boardman This paper analyzes the operating and stock price performance of the major Canadian share-issue privatizations, including Air Canada, Canadian National Railway, Petro-Canada, and six provincial privatizations. First, using time-series accounting data, we examine changes in operating and financial performance before and after privatization. Second, we compare the Canadian performance experience to privatizations in other countries. Third, we examine the long-run effect of privatization on shareholder returns. The evidence indicates that privatization significantly improved the operating and financial performance of Canadian companies. Net income, profitability, efficiency, and dividend payments were significantly higher following privatization than before privatization. Employment and debt were significantly lower following privatization. Relative to privatizations in other industrialized countries, Canadian corporations did not grow as fast and had more layoffs. However, they experienced greater increases in profit and profitability, and larger reductions in debt. The increases in productivity, capital expenditures, and dividend payments were similar to firms in other countries. In the five years following privatization, shareholders of Canadian companies enjoyed significant, positive, market-adjusted buy-and-hold returns. This suggests that the operating performance improvements were larger than was expected at the time of privatization. Résumé Cette étude analyse les performances économiques et financières des sociétés d'État canadiennes qui ont été privatisées. En utilisant des données temporelles avant et après la privatisation, nous analysons trois entreprises privatisées par le gouvernement fédéral canadien (Air Canada, Pétro-Canada, et le Canadien National) ainsi que six autres entreprises privatisées par les gouvernements provinciaux. Nous comparons l'expérience canadienne aux autres privatisations majeures qui ont eu lieu à travers le monde. Finalement, nous étudions les rendements que ces entreprises ont procurés à leurs actionnaires. Les résultats tendent à démontrer qu'au Canada, la privatisation a eu un effet positif sur la performance. La rentabilité, la productivité, et les paiements de dividendes des entreprises canadiennes privatisées ont augmenté significativement suite à la privatisation. Le nombre d'employés et les niveaux d'endettement ont diminué de façon marquée. Comparativement aux privatisations mondiales, les privatisations canadiennes n'ont pas obtenu une croissance aussi grande et ont procédé à plus de mises à pied. Toutefois, on note une plus grande amélioration de la rentabilité et une plus grande réduction de l'endettement. Durant les cinq années qui ont suivi la privatisation, les actionnaires d'entreprises canadiennes privatisées ont bénéficié de rendements boursiers supérieurs à ceux procurés par l'ensemble du marché canadien de même que supérieurs à ceux procurés par les entreprises privatisées à travers le monde. Ce résultat tend à démontrer que l'amélioration de la performance des entreprises canadiennes privatisées a dépassé les attentes des investisseurs. [source] | ||||||||||||||||||||||