International Dividend Repatriations

Abstract

This Working Paper should not be reported as representing views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Income earned by the branches and subsidiaries of multinational firms can be either reinvested in the host country or repatriated as dividends to the firms' headquarters. Despite the rapid growth of foreign direct investment in the 1990s, there has been relatively limited analysis of the dividend behavior of multinationals. We find that investors in multinationals from the two largest foreign-investing countries-the United Kingdom and the United States-require a steady flow of dividends, consistent with a view that such regular dividend payments are a mechanism through which to discipline host-country managers. In contrast, German investors, who tend to invest in riskier countries, do not appear to demand persistent dividend payments. Changes in income also influence dividends. This payout ratio from income appears, for example, to be lower for less risky countries. Finally, the evidence suggests that dividend payments do not necessarily aggravate the balance of payments position during crises.

Dividend behaviour of Indian companies under monetary policy restrictions

“…Since the coefficients of kit Eit and Dit-1 are constrained to sum to one it is possible to estimate the value of kit. While estimating the model, we also release the constraint restricting the influence of past dividends to only one lag and extend estimations to two lags as suggested in Lehmann and Mody (2004). They also suggest considering the possibility of asymmetric response of dividends to positive and negative income changes.…”

Impacto de la repatriación de utilidades de la IED estadounidense en América Latina

“…Cuando la propiedad es parcial (o se localizan en lugares con débiles derechos de propiedad) las casas matrices está dispuestas a pagar mayores dividendos (Desai, Foley y Hines, 2002). Asimismo, el pago sistemático de dividendos es un mecanismo de monitoreo y disciplina de los directivos en las filiales extranjeras (Lehmann y Mody, 2004). En un escenario en el que el objetivo de los directivos diverge al de los accionistas surgen costos de agencia.…”

Does Foreign Direct Investment Provide Desirable Development Finance? The Case of China

“…Therefore, for the economy as a whole, the cost of accumulating every US$1 reserve asset is the spread between the private sector's cost of obtaining foreign capital and the yield that the central bank earns on foreign government bonds (Rodrik, 2006). 13 In the case of China, the cost of obtaining FDI was 8.3 percent during 1995-1998 (Lehmann and Mody, 2004) for an estimate of the internal return over costs of FDI, whereas the average return on US Treasury bills and other government agency securities, in which the Chinese central bank has invested three-quarters of its reserves, is 5.3 percent for the same period. With the cost exceeding the yield, such a financing scheme is indeed ill-advised and self-defeating.…”