What Can explain catering of dividend? Environment information and investor sentiment

Bilel, Hadfi; Kouki, Mondher

doi:10.1007/s12197-021-09540-0

Cited by 7 publications

(3 citation statements)

References 69 publications

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“…Of course, managers also have the ability to assess and cater to investor sentiment. Executives with information and experience advantages can determine whether investor sentiment is optimistic based on their expectations and behaviors as reflected in equity trading or other situations (Bilel and Mondher, 2021 ). Meanwhile, prior research reveals that executives can engage in financial activities that cater to investor sentiments, such as cash dividends (Baker and Wurgler, 2004a ), investments (Polk and Sapienza, 2009 ), and name changes (Cooper et al, 2005 ).…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…Correspondingly, managers may make decisions, such as catering activities based on firm-level investor expectations and gambling tendencies. On the other hand, the rapid development of the Internet and technology provide adequate information about stock trading and market evaluations for the managers, who have the advantages of information and governance to effectively detect and determine investors' optimistic expectations and gambling tendencies in stock trading (Bilel and Mondher, 2021 ). In addition, investors with optimistic expectations and higher gambling tendencies may overestimate or underestimate the probabilities of gains or losses, which leads them to increase investments and stock purchases after receiving positive information (Miller, 1977 ; Morellec and Schurhoff, 2011 ).…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

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Rational catering of irrational emotions: Investor sentiment and executive tone

Jing

Yang

2022

Front. Psychol.

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In China, investors generally make decisions depending on the intonation of executive announcements. A total of 20,328 observations are sampled from the Chinese equity market between 2005 and 2019. We perform principal component analysis to produce monthly sentiment indices and calculate the weighted average of the value over the fiscal year to measure the degree of investor sentiment. The results of the empirical analysis reveal that: (1) there is a significant positive correlation between market-level investor sentiment and executive tone, (2) stock price and trading-volume pressures on executives, and firm-level investor expectation and gambling tendency positively moderate the relationship between investor sentiment and executive tone, (3) executive optimism does not mediate the association between investor sentiment and executive tone, and (4) manipulated and real intonations are non-homogeneous tactics adopted by rational managers to cater to changes in investor sentiment. These findings indicate that executives' intonations are both an extension of firms' current and past performances and managers' decision-making based on sentiments and behaviors of irrational investors, which are consistent with the Catering Theory. In addition, rational executives tend to adopt various intonation tactics to respond to investor sentiment to avoid declines in stock prices and trading volumes.

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Section: Literature Review and Hypothesesmentioning

confidence: 99%

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Rational catering of irrational emotions: Investor sentiment and executive tone

Jing

Yang

2022

Front. Psychol.

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“…However, the dividend is a complex decision attributable to numerous factors and pragmatic considerations across regions, sectors, industries (Ramaratnam et al 2012; Singla and Samanta 2019), and environmental situations (Gangil and Nathani 2018;Ghose and Kabra 2016). Moreover, the firm's payout flexibility is constrained to legal requirements (Al-Najjar and Kilincarslan 2017), debt covenants, available liquidity (Thaiyalnayaki and Reddy 2018), agency relationship (Jensen 1996), board composition, ownership structure (Rajput and Jhunjhunwala 2019; Juhmani 2020), viable investment opportunities, firm growth rate (Walter 1963), and investors' expectations (Baker and Wurgler 2004;Bilel and Mondher 2021).…”

Section: Introductionmentioning

confidence: 99%

Impact of Elimination of Dividend Distribution Tax on Indian Corporate Firms Amid COVID Disruptions

Agrawal

2021

JRFM

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Economic fallouts from COVID-19 have been unprecedented across all industries, with a handful of exceptions. The present study attempts to capture the impact of dividend distribution tax elimination, introduced through the Indian Finance Act 2020, on corporate dividend behavior in India. It explores the determinants of dividend payouts, changing payout decisions, dividend behavior of regular payers, and the prevalence of factors associated with changing payouts. Out of the top 1000 firms, based on their market capitalization at the Bombay Stock Exchange, 509 non-financial firms pursuing consistent dividend payments from 2015 to 2019 are analyzed. The study also examines the dividend behavior of regular payers exhibiting a stable or step-up payout from 2015 to 2019. COVID’s impact on the firm’s financial performance and sentiments seems to dominate, suppressing investors’ expectations of enhanced payouts associated with dividend distribution tax advantages, with considerable reductions in payouts and omissions shown by regular and irregular payers in 2020 and 2021 vis-à-vis the preceding years. The findings signify that the dividend payouts of sample firms are positively associated with the firms’ size, MBV ratio, and past dividends, and negatively allied with free cash flows and the EBITDA margin. Regular payers are observed to be more sensitive to past dividends. The study lends credence to the conservatism and prevalence of signaling and catering theories in the dividend behavior of Indian corporate firms.

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