The monitoring rationale for dividends and the interaction of capital structure and dividend decisions

Noronha, Gregory; Shome, Dilip K.; Morgan, George Emir

doi:10.1016/0378-4266(95)00010-0

Cited by 68 publications

(35 citation statements)

References 19 publications

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“…Non-debt tax shield (NDT): the tax saving interest of the debt would be balanced by non-debt tax shield. Therefore, non-debt tax shield and the leverage were negative correlated (DeAngelo and Masulis, 1980;Doukas and Pantzails, 2003;Noronha, 1996;Ozkan, 2001). Ratio of depreciation and amortization expenses to total sales was used for measurement.…”

Section: Measure Variablesmentioning

confidence: 99%

Internationalization and Capital Structure of Taiwan Electronic Corporations

Lin¹,

Hung²

2011

IBR

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This paper analyzes capital structure between the internationalized and domestic electronic industries in Taiwan from 1999 to 2008 as the reference for financing strategies and decision. The evidence shows that the leverage and the payout cash dividend ratio in the internationalized electronic firms are lower than those in domestic electronic firms. Due to the uniqueness and the high profit ability of the internationalized electronic firms in the Taiwan, they have more earnings and inside capital so that the leverage is lower. On the contrary, the internationalization level is irrelevant with the payout cash dividend ratio due to the payout cash dividend depending on the dividend balance policy regulated by government in Taiwan.

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Section: Measure Variablesmentioning

confidence: 99%

Internationalization and Capital Structure of Taiwan Electronic Corporations

Lin¹,

Hung²

2011

IBR

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“…13 Lang and Litzenberger (1989) chose the debt in book value when the market value was not available. 14 This measurement was chosen by Nijoukou (1994), Noronha et al (1996).…”

Section: Ownership Variablesmentioning

confidence: 99%

Ownership structure and the performance of firms: Evidence from France

Séverin

2001

E.J.E.S.S.

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Abstract. -This paper deals with the influence of ownership structure, variables of external and organisational discipline on financial and economic performance. By means of self-organising maps, in particular Kohonen maps, we highlight three main results. Firstly, the results obtained from a sample of French companies are consistent with the findings of Morck, Shleifer and Vishny (1988), McConnell and Servaes (1990) and Short and Keasey (1999) and suggest a non-linear relation between ownership structure and performance. Secondly, the variables of external discipline, that is leverage and stock-turnover, partly explain performance. Although debt level negatively influences performance (Opler and Titman, 1994), conversely, stock-turnover has a beneficial impact on performance (Charreaux, 1997). Finally, though the organisational variables seem to have no significant impact on performance, corporate size has a positive influence on performance.Classification Codes: C450, G320.

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“…Much of the established literature attempts to estimate an agency cost function which characterizes the impact dividend policies and insider ownership on the firm's debt position (Jensen & Meckling, 1976;Ross, 1977;Kalay, 1982;Myers & Majluf, 1984;Jensen, 1986;Morck, Shleifer, & Vishny, 1988). The majority of these studies account for the simultaneity bias that exists between debt, dividends, and ownershipusing two-stage least squares if estimating a single agency cost equation (Bathala, Moon, & Rao, 1994;Chen & Steiner, 1999) or some combination of three-stage least squares (Jensen, Solberg, & Zorn, 1992;Noronha, Shome, & Morgan, 1996;Kim, Rhim, & Friesner, 2007) orfull information maximum likelihood or generalized method of moments (Pindado & de la Torre, 2006)if estimating a system of equations. In some cases, for example Crutchley et al(1999) and Chen and Steiner (1999), an attempt is made to explicitly specify a nonlinear agency cost function.…”

mentioning

confidence: 99%

Measuring Agency Costs in the Presence of Incidental Truncation: Empirical Evidence from Chinese Firms

Rhim¹,

Brajcich²,

Friesner³

2014

Glob Bus Financ Rev

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A B S T R A C TSubstantial literature attempts to estimate the potential and magnitude of agency costs including an agency cost function that characterizes the impact of dividend policies and insider ownership on firm debt. These approaches are problematic because they assume all firms can be aggregated, even whenthey have different approaches to resolving agency costs. Agency cost estimates tend to average out the results across firms or rely on non-linearities to identify disparate incentives leading to mixed results. This paper develops an empirical agency cost model that can account for firms which do not offer dividends or have limited insider ownership. Assuming that such discrete decisions are intentional, we model agency cost decisions within an incidental truncation framework to publicly traded Chinese manufacturing firms and find the convergence of interests theory holds when firms do not offer dividends or allow insider ownership, and entrenchment theory holds when firms pay dividends and/or allow insider ownership.

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The monitoring rationale for dividends and the interaction of capital structure and dividend decisions

Cited by 68 publications

References 19 publications

Internationalization and Capital Structure of Taiwan Electronic Corporations

Internationalization and Capital Structure of Taiwan Electronic Corporations

Ownership structure and the performance of firms: Evidence from France

Measuring Agency Costs in the Presence of Incidental Truncation: Empirical Evidence from Chinese Firms

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