Dividend Behavior for the Aggregate Stock Market

Marsh, Terry A.; Merton, Robert C.

doi:10.1086/296383

Cited by 250 publications

(164 citation statements)

References 47 publications

Supporting

Mentioning

152

Contrasting

Unclassified

Order By: Relevance

“…This procedure implicitly assumes cross-sectional independence of firm statistics and may yield biased test statistics since the cross-section of investments, earnings, and payouts are correlated. An alternative approach is to aggregate firm-level data and examining the dynamics of the aggregate data (as do, for example, Lamont 1998 and 2000, who examines the relations between earnings, investments, and stock returns, and Marsh and Merton 1987, who examine the relation between dividends and prices). The advantage of examining aggregate data is that the aggregate series incorporate the cross-sectional correlation and retain the time-series rof415-03.tex; 23/08/2004; 12:09; p.4 dynamics.…”

Section: Methodsmentioning

confidence: 99%

A Time-Series Analysis of Corporate Payout Policies

Sarig

2004

Review of Finance

View full text Add to dashboard Cite

Abstract. I conduct a time-series analysis of corporate payout policies that accounts for the dynamic nature of these decisions and for the interaction among investment decisions and payout policies. The estimation is done with a VAR model of investments, earnings, total payout, and the split of the total payout between dividends and share repurchases. I control for changes in the legal treatment of share repurchases in 1982 and for changes in the relative taxation of dividends and capital gains. I find that: (i) an increase in the taxation of capital gains relative to dividends shifts the split of total payout away from share repurchase and toward dividends; (ii) corporate investment decisions lead payout policies and not the other way around; (iii) increases in corporate total payout are associated with long-term subsequent increases in earnings; (iv) changes in the composition of corporate payout away from share repurchases and toward dividends are associated with subsequent increases in earnings.

show abstract

Section: Methodsmentioning

confidence: 99%

A Time-Series Analysis of Corporate Payout Policies

Sarig

2004

Review of Finance

View full text Add to dashboard Cite

show abstract

“…Important studies that follow and extend MM (1961) are Allen et al (2000), Amihud et al (2009), Asquith and Mullins (1983), Bagwell and Shoven (1989), Baker et al (1985), Baker and Wurgler (2004b), Banerjee et al (2007), Benartzi et al (1997), Bhattacharya (1979), Black (1976, Black and Scholes (1974), Blau and Fuller (2008), Brav et al (2005), Dann (1981), DeAngelo et al (1996DeAngelo et al ( , 2008, Eades et al (1994), Eije and Magginson (2008), Fama and Babiak (1968), French (2001), Feenberg andCoutts (1993), Graham and Harvey (2001), Hakansson (1982), Healy and Palepu (1988), Hubbard and Michaely (1997), John and Williams (1985), Kothari and Shanken (1997), La Porta et al (2000), Lintner (1956), Liu et al (2008), Long (1978), Marsh and Merton (1987), Michaely et al (1995), Miller (1977, Miller and Rock (1985), Miller and Scholes (1978), Partington (2009), Peterson et al (1985), Poterba (1986), Shefrin and Statman (1984), and Watts (1973), for example. (2006), and Hoberg and Prabhala (2009).…”

Section: Notesmentioning

confidence: 99%

A Test of Dividend Policy: The Case of the Japanese Machinery Industry Firms

Tsuji¹

2011

IJEF

View full text Add to dashboard Cite

This paper comprehensively explores the determinants of the dividend policy of the Japanese machinery industry corporations. First, our empirical examinations clarify that in this industry, corporate managers do not cater to investors' dividend demand in both their dividend initiation and continuation decisions. Instead, in the Japanese machinery industry, the significant determinants of firms' dividend initiations are value-weighted payers' and nonpayers' market-to-book ratio, value-weighted all companies' dividend yields, value-weighted nonpayers' size, and nonpayers' value-weighted after-tax earnings-to-total-asset ratios in the previous year. Moreover, in this industry, the significant determinants of firms' dividend continuations are value-weighted all companies' market-to-book ratio, value-weighted payers' market-to-book ratio, value-weighted all companies' dividend yields and size, and payers' value-weighted size in the previous year.

show abstract

“…The most important implications of the Lintner model given in Equation (1) and Equation (2) can be summarized as follows (based on Marsh and Merton, 1987;Bessler and Ellermann, 2004):…”

Section: The Model Frameworkmentioning

confidence: 99%

Does Lowering Dividend Tax Rates Increase Dividends Repatriated? Evidence of Intrafirm Cross-Border Dividend Repatriation Policies by German Multinational Enterprises

Bellak¹,

Leibrecht²

2010

View full text Add to dashboard Cite

This paper explores the impact dividend taxes exert on the dividends repatriated from foreign affiliates to their German parent company. Based on an augmented Lintner model of firms' dividend payout decisions, the paper focusses on cross-border intra-firm dividend payments of wholly-owned foreign affiliates in the manufacturing sector. Firm-level data from the Microdatabase Direct Investment (MiDi) of the Deutsche Bundesbank is used. Results firstly signal the validity of the original Lintner model for cross-border intra-firm dividend payments of German affiliates abroad, although the target payout ratio and the degree of dividend smoothing drops substantially once timeinvariant unobserved heterogeneity is controlled for. Secondly, results from an augmented Lintner model imply that increases in dividend taxes indeed have a statistically significant negative impact on the expected value of dividends repatriated: Evaluated at the overall mean dividend payment a one percentage point increase in the dividend tax rate would decrease dividends repatriated by about 3.5 percent. Evaluated at the mean of positive dividend payments a semi-elasticity of -1.6 is derived.Keywords: Dividend Policy, Taxes, Lintner Model, Multinational Enterprise JEL codes: G35, H25 Non technical summaryThe aim of this study is to analyse whether dividend taxes exert a statistically and economically relevant impact on the expected value of dividends repatriated from foreign affiliates to their German parent company over the 1999-2005 period. The paper contributes to the literature as evidence on the impact dividend taxes have on cross-border intra-firm dividend payments is rather scarce. This is especially the case for countries applying the exemption system in international taxation, like Germany. The analysis is based on data provided by the Deutsche Bundesbank's Microdatabase Direct Investment (MiDi) database. Specifically, data on German foreign affiliates in the manufacturing sector which are directly and whollyowned by a German parent company is used for the analysis. Host countries included are the EU member countries (as of 2007) and the most advanced Non-EU OECD countries. In total, information contained in yearly data on 587 German affiliates abroad over 7 years is explored. The analysis is based on the widely known Lintner model of dividend smoothing, which is frequently seen as a relevant description of firms' dividend payout behavior. The Lintner model is a partial adjustment model suggesting that firms have a target dividend payment, which is a fraction of its current earnings. The model leads to an empirical specification relating dividends paid to lagged dividends and current earnings of the firm. However, the basic Lintner model has been established for dividend payments to public shareholders, but not the intra-firm case and moreover it does not include taxes as determinants of dividend payments. Thus, two issues prior to exploring the tax effect within the Lintner framework arise: (i) it has to be established that the...

show abstract

Dividend Behavior for the Aggregate Stock Market

Cited by 250 publications

References 47 publications

A Time-Series Analysis of Corporate Payout Policies

A Time-Series Analysis of Corporate Payout Policies

A Test of Dividend Policy: The Case of the Japanese Machinery Industry Firms

Does Lowering Dividend Tax Rates Increase Dividends Repatriated? Evidence of Intrafirm Cross-Border Dividend Repatriation Policies by German Multinational Enterprises

Contact Info

Product

Resources

About