A Growth Type Explanation for Persistence in Retained Earnings and Propensity to Pay Dividends

Wu, Xueping; Yeung, Chau Kin Au

doi:10.2139/ssrn.1653218

Cited by 2 publications

(1 citation statement)

References 35 publications

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“…A Growth Type Explanation for Persistence in Retained Earnings and Propensity to Pay Dividends was sought by Wu and Yeung (2010). The study reveals that while firms that typically pay dividends already have high ratios of retained earnings-to-total-equity (RE/TE) and high propensities to pay (PTP) early on, firms that typically do not pay dividends have persistently low RE/TE and low PTP even after 20 years of growth.…”

Section: Retained Earnings and Firm Performancementioning

confidence: 99%

Revenue Reserves and Financial Performance in the Brewery Industry: Evidence from Nigeria.

Ekwe

Inyiama

2014

AEF

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The research evaluates the co-integration, magnitude and strength of the relationships between corporate retentions as proxied by retained earnings and some key financial performance indicators, in the Nigeria manufacturing industry using the Brewery sub-sector as a focal point. The ex-post facto research designed which made use of secondary data obtained from annual reports and accounts of the two market leaders in the sector: Nigeria Breweries Plc and Guinness Nigeria Plc, from year 2000 to 2013.The magnitude of association of the variables was validated using the ordinary least squares method. Augmented Dickey-Fuller (ADF) test was also conducted on all the variables to check for stationary of time series data. Log of retained earnings, current asset ratio, dividend per share attained stationary at first difference, while earnings per share, net asset value per share, price -to-earnings ratio and market price of equity shares, achieved stationary at second difference. Results indicate that a strong relationship (about 77%) exist between retained earnings and net asset value per share. Also long run relationship exists between retained earnings, and the rest of the variables implying that, if the retained earnings are properly invested, the returns will catalyze growth, development and expansion of the firms while the financial performance indicators will serve as predictors to the appropriate levels of retentions and investment which could guarantee good bottom line without incurring the opportunity cost of excess liquidity.

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Section: Retained Earnings and Firm Performancementioning

confidence: 99%

Revenue Reserves and Financial Performance in the Brewery Industry: Evidence from Nigeria.

Ekwe

Inyiama

2014

AEF

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Do Market Imperfections Give Rise to Financial Constraints? A Growth Type Explanation for the Sensitivity of Investment to Cash Flow

Yeung

2012

SSRN Journal

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Abstract:We identify a firm's growth type by its valuation volatility which proxies for the extent to which asymmetric information arises from growth opportunities rather than from assets-in-place. We show that firm investment style (measured by R&D/[Capex+R&D]) is persistent and positively aligned with growth type. The sensitivity of investment to cash flow has a monotonic negative relationship with growth type. Additionally, the sensitivity of equity-anddebt-financing-differential to market conditions increases with investment style, reflecting a growth-type-aligned pecking order in financing. These findings demonstrate that firms invest and seek financing in a manner compatible with their growth type. This suggests that informational imperfections do not necessarily impose financing constraints on firms listed on well-functioning capital markets.

show abstract

A Growth Type Explanation for Persistence in Retained Earnings and Propensity to Pay Dividends

Cited by 2 publications

References 35 publications

Revenue Reserves and Financial Performance in the Brewery Industry: Evidence from Nigeria.

Revenue Reserves and Financial Performance in the Brewery Industry: Evidence from Nigeria.

Do Market Imperfections Give Rise to Financial Constraints? A Growth Type Explanation for the Sensitivity of Investment to Cash Flow

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