Dividend Policy and Stock Acquisition Announcement Returns: A Test of Asymmetric Information Theory

Turki, Aymen

doi:10.1111/jfir.12164

Cited by 10 publications

(6 citation statements)

References 118 publications

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“…Consistent with Onali et al (2016), firms with higher returns volatility have a lower propensity to pay dividends. Conversely, the trend of paying dividends in the industry has a positive impact on firms' decision to pay dividends, which is consistent with the findings of Booth and Chang (2011) and Turki (2019).…”

Section: Resultssupporting

confidence: 87%

“…The trend of dividend distribution in an industry affects the firm's decision to pay dividends. Dividend payments are not homogenous across industries, therefore, proportion of dividend payers in an industry tends to have positive impact on the decision to pay dividends (Booth and Chang, 2011; Turki, 2019). However, it is less likely that proportion of dividend payers affect the amount of dividend payment.…”

Section: Methodsmentioning

confidence: 99%

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Corporate social responsibility and dividend policy: a strategic choice in family firms

Sheikh

Bhutta

Rehman

et al. 2021

JFBM

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PurposeThe purpose of this study is to examine whether corporate social responsibility (CSR) affects dividend policy (the propensity to pay dividends as well as the dividend payout ratio) and what role family ownership plays in this regard in an emerging market.Design/methodology/approachThe study uses a sample of 1,480 observations from Pakistan for the period 2010–2016 and accounts for Hackman self-selection bias and endogeneity issues using a robust regression analysis. CSR activity is measured by CSR score developed through a content analysis of firms' annual reports.FindingsThe study finds that the greater number of CSR activities increases the propensity to pay dividends, but reduces the dividend payout in dividend-paying firms. On the other hand, in family firms, the greater number CSR activities decreases the propensity to pay dividends, but increases the dividend payout in dividend-paying firms. The findings hold for a series of robustness and sensitivity checks, for example, alternative measures, specifications and estimators.Practical implicationsA trade-off between firms' CSR activities and dividend policy needs to be the point of concern for investors, minority shareholders and policy makers. The role of the non-executive and independent directors becomes more important, especially in the family firms where family members sitting on the boards may drive CSR activities in their own interests opportunistically. The potential opportunistic behaviour of family members warrants the need for policy reform initiatives to strengthen the protection of other stakeholders' interests.Originality/valueThe study highlights that family owners' efforts to preserve their socio-emotional wealth in family firms affect the relationship between CSR activities and dividend policy. Further, the relationship between CSR and dividend policy in emerging markets is different from developed markets. This study simultaneously focuses on both the propensity to pay dividends and the amount of dividend payment and documents that the implications of CSR are different for them.

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Section: Resultssupporting

confidence: 87%

Section: Methodsmentioning

confidence: 99%

Corporate social responsibility and dividend policy: a strategic choice in family firms

Sheikh

Bhutta

Rehman

et al. 2021

JFBM

View full text Add to dashboard Cite

show abstract

“…The sustained adverse price response to these high‐risk payouts is in line with the evidence of a post‐dividend‐announcement drift (see Bae ; Howe, Vogt, and He ; Michaely, Thaler, and Womack ). Our findings are also consistent with studies showing that payout reduces the information asymmetry around firm value (see Turki ).…”

Section: Introductionsupporting

confidence: 92%

Implications of Unsustainable Dividends

Harris

Ngo

Susnjara

2020

J of Financial Research

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In this article, we examine the wealth effects of unsustainable dividend payments and explore the economic forces that may explain why they exist. We find that the larger the dividend–earnings differential, the lower the short‐ and long‐run wealth effects to shareholders. In addition, the dividend–earnings differential increases not only the probability of a subsequent dividend cut over the next four quarters but also the likelihood that the cut will be greater than 5%. Overall, our findings suggest that although investors are not fooled by unsustainable dividend payments, the negative announcement effects are in anticipation of protracted poor performance.

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“…By contrast, the signal from a declaration of a reduction or nonpayment of dividends sends negative information to shareholders, who may interpret this as a negative future performance outlook of the firm, hence selling their shares. The empirical works of Turki (2019) and Gim and Jang (2023) support this proposition.…”

Section: Literature Reviewmentioning

confidence: 82%

The story of dividend payment and corporate cash flow in Ghana

Amoah

2024

African Development Review

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The thorny issue and contradictory conclusions on dividend payments and firm value are not ending any time soon. The existence of a divergence of findings in the literature suggests the need for further empirical studies on this subject matter. Therefore, this study focuses on how a firm's cash flow influences dividend payments in Ghana. Using data from 2015 to 2020, pooled ordinary least squares and random effects estimation, this study provides evidence of dividend payments in Ghana. The results show that dividend payments are influenced by a firm's net cash flow from operations, free cash flow to equity, firm size, and age. The relevant macroeconomic variables for dividend payments are inflation and gross domestic product growth. Another finding is that the more nonfinancial firms take on the characteristics of financial firms, the less dividends they pay. Managers of listed firms in Ghana should grow the size of their firms; however, this should be done in a manner not to expropriate value to managers as predicted in the Jensen agency problem associated with free cash flow.

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Dividend Policy and Stock Acquisition Announcement Returns: A Test of Asymmetric Information Theory

Cited by 10 publications

References 118 publications

Corporate social responsibility and dividend policy: a strategic choice in family firms

Corporate social responsibility and dividend policy: a strategic choice in family firms

Implications of Unsustainable Dividends

The story of dividend payment and corporate cash flow in Ghana

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