Patterns in payout policy and payout channel choice

Renneboog, Luc; Trojanowski, Grzegorz

doi:10.1016/j.jbankfin.2010.10.028

Cited by 80 publications

(84 citation statements)

References 56 publications

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“…Variables that may affect dividend policies used on this study are presented below. Formulas and calculations are shown in Table 2. ◆ Size: Based on the results of previous studies (Renneboog & Trojanowski, 2011;Moh' d et al, 1995), larger companies are expected to be more likely to pay dividends than smaller companies.…”

Section: Table 1 Summary Of Factors That Influence Dividend Paymentsmentioning

confidence: 99%

Determinant Factors of Dividend Payments in Brazil

Forti

Peixoto

Alves

2015

Rev. contab. finanç.

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This study identifies factors that shaped cash disbursement distribution policies employed by Brazilian public companies listed on the Brazilian Securities, Commodities and Futures Exchange (BM&FBOVESPA) from 1995 to 2011. Relationships between Dividends/Total Assets and potential determinants discussed in the literature, including firm size, corporate governance, profitability, leverage, market to book, liquidity, investment, risk, profit growth, information asymmetry and agency conflict, are examined. The following econometric methods are employed: (1) Tobit, given the nature of the dividend data, and (2) the Generalized Method of Moments (GMM) to control for endogenous regressors. Significant positive variables found include size, return on assets (ROA), market to book, liquidity and profit growth. It can thus be inferred that larger firm size, profitability, market value, liquidity and profit growth correlate with greater firm propensity to distribute money to shareholders, thus supporting the theory of corporate finance. Significant negative variables found include leverage, liquidity squared, capex, beta and tag along 100%. It is thus inferred that more significantly leveraged companies that invest more heavily in fixed assets and that exhibit high liquidity, higher risk and less conflict between controlling and minority shareholders will be less likely to pay dividends to shareholders.

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Section: Table 1 Summary Of Factors That Influence Dividend Paymentsmentioning

confidence: 99%

Determinant Factors of Dividend Payments in Brazil

Forti

Peixoto

Alves

2015

Rev. contab. finanç.

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“…A number of reasons have been advanced that cause the above statement not to hold, including taxation and tax clienteles, the use of dividends as a signaling device, the dividend catering theory, and personal motives by management induced by the structure of their compensation packages. Share repurchases are used for occasional payout of excess cash and is hence a more flexible payout device than dividends, which are more 'sticky' -especially with regard to downward adjustments (Ofer and Thakor, 1987;Stephens and Weisbach, 1998;Jagannathan et al, 2000;Renneboog and Trojanowski, 2011). CEOs with option packages tend to prefer share repurchases and avoid dividends because of the associated negative effect on their personal wealth in case part of their remuneration package consists of non-dividend corrected stock options (and restricted stock) (Fenn and Liang, 2001;Liljeblom and Pasternack, 2006;Aboody and Kasznik, 2008;Geiler and Renneboog, 2014).…”

Section: Introductionmentioning

confidence: 99%

Taxes, earnings payout, and payout channel choice

Geiler

Renneboog

2015

Journal of International Financial Markets, Institutions and Mo

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JEL classification: G28 G30 G35 G38 a b s t r a c tWe study the tax regulations in relation to dividends and capital gains over the last two decades for the UK in order to determine whether changes in tax regimes affect corporate payout policy (dividends, share repurchases, or a combination). While we can identify investors' tax-driven preferences for a specific payout channel, we find no evidence of taxinduced clienteles. Firms do indeed not cater to the tax preferences of their shareholders (including individuals, pension funds, corporations). Other factors, such as equity-based compensation received by the CEO and investor sentiment in the form of optimism reduce the dividend payout and increase the use of share repurchases.'But in the real world there remains one overwhelming reason why dividend policy is not irrelevant: tax. The way dividends are taxed can have wide-ranging consequences for how a firm is run. In particular, it can influence whether a firm finances itself primarily through equity or debt, and how it chooses to return profits to its shareholders.' (The Economist, 9th January 2003) 'In Britain Gordon Brown staged an infamous pensions tax "grab" in 1997, which reduced private pension funds' income by around £5 billion (then $8.4 billion) a year by eliminating the tax credit on dividend payments.' (The Economist, 2nd December 2010) 'In America dividends seemed to go out of fashion in the 1990s. A yield of 2% or so appeared trivial when the market was rising by 20% a year. The disrespect for dividends also reflected the belief that, for tax reasons, share repurchases were a better way of returning cash to investors.' (The Economist, 2nd September 2010)

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“…They also explain that this preference is logical since institutions may be acting as good stewards for their investors whose income is taxable by reducing their taxes through the substitution for repurchases in place of dividends. Renneboog & Trojanowski (2011) report a result that is inconsistent with tax-clientele explanations for payouts. They find that tax-exempt financial institutions in the U.K. prefer repurchases over dividends.…”

Section: Literature Reviewmentioning

confidence: 95%

Institutional Investors, Stock Repurchases and Information Asymmetry

Scott

2014

International Journal of Financial Research

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This paper seeks to determine if institutional investors influence stock repurchases. Specifically, this study tests whether institutional investors encourage stock repurchases in firms with high information asymmetry. Firm and year fixed effect regressions examining the effect of changes in institutional investor levels to subsequent changes in stock repurchase levels are used. For robustness, regressions are run using difference-GMM regressions and regressions for different time periods on the same relationship. I find that increased institutional ownership leads to increased stock repurchases and this relationship is stronger in firms with higher information asymmetry. Results indicate that institutional investors encourage management to increase repurchases so as to exploit their informational advantage over less informed investors about the true value of the firm. Institutions are the dominant force in U.S. stock ownership. The results in this paper indicate that institutional investors are using their informational advantage in firms that are difficult to value in an attempt to boost their return at the expense of other less informed shareholders.

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Patterns in payout policy and payout channel choice

Cited by 80 publications

References 56 publications

Determinant Factors of Dividend Payments in Brazil

Determinant Factors of Dividend Payments in Brazil

Taxes, earnings payout, and payout channel choice

Institutional Investors, Stock Repurchases and Information Asymmetry

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