A test of the Modigliani-Miller theorem, dividend policy and algorithmic arbitrage in experimental asset markets

Neugebauer, Tibor; Shachat, Jason; Szymczak, Wiebke

doi:10.1016/j.jbankfin.2023.106814

Cited by 3 publications

(3 citation statements)

References 23 publications

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“…One of the earliest applications of experiments in finance was theory testing. In this Special Issue, Neugebauer et al (2023) experimentally test and largely support the Modigliani-Miller (MM) theorem in a complete market with two simultaneously traded assets and either identical or independent dividend payment orders. They find support for the law of one price when dividends are identical, but theory breaks down when dividend payment order is independent.…”

Section: Overview Of the Special Issue "Experiments In Finance"mentioning

confidence: 88%

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Experiments in finance

Kirchler

Weitzel

2023

Journal of Banking & Finance

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Section: Overview Of the Special Issue "Experiments In Finance"mentioning

confidence: 88%

“…Their results show that allowing for both shorting and informed trading reduces mispricing and spreads, but without interaction effects between the two regulations. Neugebauer et al (2023), mentioned above, also employ experimental asset markets to test the MM theorem.…”

Section: Overview Of the Special Issue "Experiments In Finance"mentioning

confidence: 99%

Experiments in finance

Kirchler

Weitzel

2023

Journal of Banking & Finance

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“…Recent experimental studies have also focused on the impact of AT on liquidity and price efficiency, showing that arbitrage bots can increase both trading volume (see Berger, DeSantis, and Porter (2020)) and price efficiency in double auctions with specialized buyers and sellers à la Smith (1962) as well as in continuous double auction markets (Angerer, Neugebauer, and Shachat (2023); Neugebauer, Shachat, and Szymczak (2023)). Recent works have also studied the impact of institutional changes on AT.…”

Section: Experimental Approach and Literaturementioning

confidence: 99%

Algorithmic Trading, Price Efficiency and Welfare: An Experimental Approach

2023

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Chief executive officer duality and the relationship between firm performance and dividend payouts

Sheng,

Montgomery

2024

JGR

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Using a panel of data on manufacturing firms listed on the Chinese stock exchange over the period 2017 to 2022, this research paper empirically investigates the relationship between firm performance and dividend payouts. Unique features of Chinese financial markets allow us to contribute to the literature on how corporate governance, in particular concentrated managerial power and state ownership, affects agency costs and therefore the relationship between firm performance and dividend payouts (Burdeos, 2021; Debnath et al., 2022; Vicente, 2020). The main findings of this study are as follows. Firms follow the pecking order theory when funding their capital needs: firms wait for dividends, preferring to take advantage of profitable investment opportunities when firm performance is good. This negative relationship between firm performance and dividend payout is even stronger at firms with highly concentrated managerial power as indicated by chief executive officer (CEO) duality. However, state-owned enterprises, which face a double principal–agent problem that cannot be fully addressed by CEO duality, demonstrate a weaker negative relationship between firm performance and dividend payouts. We find evidence that the negative relationship between firm performance and dividend payouts strengthened during the COVID-19 pandemic: firms were even more likely during to prefer internal financing during the pandemic years.

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A test of the Modigliani-Miller theorem, dividend policy and algorithmic arbitrage in experimental asset markets

Cited by 3 publications

References 23 publications

Experiments in finance

Experiments in finance

Algorithmic Trading, Price Efficiency and Welfare: An Experimental Approach

Chief executive officer duality and the relationship between firm performance and dividend payouts

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