Does geography matter? Firm location and corporate payout policy

John, Kose; Knyazeva, Anzhela; Knyazeva, Diana

doi:10.1016/j.jfineco.2011.03.014

Cited by 384 publications

(233 citation statements)

References 34 publications

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“…John, Knyazeva, and Knyazeva (2011) further show that investors in remotely located firms demand higher dividends due to increased information asymmetries about managerial decisions.…”

Section: Background Literaturementioning

confidence: 86%

“…These studies establish the relevance of geographic proximity to investor's costs of acquiring information, which in turn influences the behavior of both investors and firms as well as the pricing of assets. For example, John, Knyazeva, and Knyazeva (2011) show that investors in remotely located firms demand higher dividends due to increased information asymmetries about managerial decisions. Investor preferences toward local or domestic firms have also been widely documented (e.g., Coval and Moskowitz (1999), Ivkovic and Weisbenner (2005), Kedia, Panchapagesan and Uysal (2008)).…”

Section: Introductionmentioning

confidence: 99%

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Search Costs, Behavioral Biases, and Information Intermediary Effects

Ling

Naranjo

Petrova

2016

J Real Estate Finan Econ

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Buyers in commercial real estate markets often pay different prices for comparable properties. We document that distant commercial real estate buyers pay, on average, a premium relative to local buyers, controlling for individual property characteristics as well as time fixed-effects. We test the extent to which the sources of these observed premiums are a product of higher search costs/information asymmetry problems associated with distance (search cost channel) or a result of reference-dependence preference/anchoring based on the price levels in the investors' home market (behavioral biases channel). Our results employing 114,588 industrial, multi-family and office sale transactions during 1997-2011 suggest the observed price premiums are explained by distant investors who face higher search costs and are at an information disadvantage compared to investors located in closer proximity to the property. In contrast, anchoring plays a more muted role in explaining the observed premiums. These results are robust to econometric techniques that control for potential unobserved property characteristics that are correlated with investor attributes. We also test the extent to which informational intermediaries affect the observed premiums and find that the use of a broker increases the acquisition prices of buyers and decreases the disposition prices of sellers. This result is consistent with the incentive real estate agents have to convince sellers to dispose of their properties too quickly and to convince buyers to search less and therefore pay higher prices.

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“…John, Knyazeva, and Knyazeva (2011) further show that investors in remotely located firms demand higher dividends due to increased information asymmetries about managerial decisions.…”

Section: Background Literaturementioning

confidence: 86%

Section: Introductionmentioning

confidence: 99%

Search Costs, Behavioral Biases, and Information Intermediary Effects

Ling

Naranjo

Petrova

2016

J Real Estate Finan Econ

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“…Chen et al (2010) argue that firms clustering around metropolitan areas are followed by a large number of specialized financial professionals, which increases the visibility of managerial actions and thus decreases the costs of their monitoring. John et al (2011) show that distance generates considerable agency costs of free cash flow leading firms located away from the ten largest US metropolitan areas to increase their dividend payouts as a way to mitigate such costs. Ayers et al (2011) document that managers' discretion over financial reporting increases with the geographic remoteness of institutional investors from a firm's headquarters; they conclude that monitoring costs incurred by these investors increase with distance.…”

Section: Review Of the Literature And Hypotheses Testedmentioning

confidence: 99%

“…John et al (2011) suggests that since distance engenders considerable free cash flow, remote firms may pre-commit to higher dividends to decrease agency costs of such free cash flow, in line with Stulz (1990).…”

Section: Introductionmentioning

confidence: 99%

Geographic location, excess control rights, and cash holdings

Boubaker

Derouiche²,

Lasfer

2015

International Review of Financial Analysis

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We assess the extent to which remotely-located firms are likely to discretionarily accumulate cash rather than distribute it to shareholders. We consider that these firms are less subject to shareholder scrutiny and, thus, will have high agency conflicts as the distance will facilitate the extraction of private benefits. Consistent with our predictions, we find a positive relation between the distance to the main metropolitan area and cash holdings, and this impact is more pronounced when the controlling shareholder has high levels of excess control rights (i.e., separation of cashflow rights and control rights). Our results hold even after accounting for all control variables, including financial constraints, and suggest that geographic remoteness can be conducive to severe agency problems, particularly when there is a large separation of cash-flow rights and control rights.JEL Classification: G30; G31; G32; G35.

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“…There are many important studies that follow MM (1961) as follows. First, the papers focused on the policies of payout of firms are Lintner (1956), Fama and Babiak (1968), Black and Scholes (1974), Bhattacharya and Hakansson (1982), Marsh and Merton (1987), La Porta et al (2000), Fama and French (2001), DeAngelo et al (2004DeAngelo et al ( , 2006, Handley (2008), Denis and Osobov (2008), Brockman andUnlu (2009, 2011), Chay andSuh (2009), andJohn et al (2011). In addition, the literature studied the signaling hypothesis of dividend policy are Watts (1973), Bhattacharya (1979), Asquith and Mullins (1983), Miller and Rock (1985), John and Williams (1985), Healy and Palepu (1988), Michaely et al (1995), DeAngelo et al (1996), Benartzi et al (1997), Johnson et al (2006), and Liu et al (2008).…”

Section: Introductionmentioning

confidence: 99%

The Market Valuation Hypothesis of Dividend Policy: New Evidence from Japan

Tsuji¹

2013

RAE

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This paper explores the determinants of the dividend policy in Japan. First, our empirical investigations reveal that in contrast to the US case, the dividend premium is neither the determinant of the dividend initiations nor the continuations of the Japanese firms. Second, we newly find that the strong determinants of the Japanese firms' dividend initiations are the nonpayers' same year's and previous year's market-to-book ratios. In addition to the above, we also reveal that the strong determinants of the Japanese firms' dividend continuations are the payers' same year's and previous year's market-to-book ratios. These results clearly support our new hypothesis, the market valuation hypothesis of the dividend policy in Japan, and demonstrate our novel contributions of this study. Furthermore, our empirical results also indicate that the Japanese corporate managers can foresee their own firms' earnings for at most two years ahead. We consider that this evidence may not be consistent with the traditional signaling hypothesis of dividend policy.

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Does geography matter? Firm location and corporate payout policy

Cited by 384 publications

References 34 publications

Search Costs, Behavioral Biases, and Information Intermediary Effects

Search Costs, Behavioral Biases, and Information Intermediary Effects

Geographic location, excess control rights, and cash holdings

The Market Valuation Hypothesis of Dividend Policy: New Evidence from Japan

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