Has the Propensity to Pay Out Declined?

Grullon, Gustavo; Paye, Bradley S.; Underwood, Shane; Weston, J. Fred

doi:10.1017/s0022109010000633

Cited by 91 publications

(41 citation statements)

References 21 publications

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“…First, following Boudoukh, Michaely, Richardson, and Roberts (), we calculate total payout as dividends (# dvc) plus repurchases (total expenditure on the purchases of common and preferred stock (# prstkc) plus any reduction in the value of the net number of preferred stock outstanding (# pstkrv)). Following Grullon, Paye, Underwood, and Weston () and Banyi, Dyl, and Kahle (), we define the determinants of total payout as the relative market capitalization (the percentile in which the firm falls on the distribution of equity market values for NYSE firms in year t ), book‐to‐market ratio (# ceq/(# prcc_f × # csho)), return on assets (# ib/# at), sales growth (# sale/lagged # sale − 1), the logarithm of number of years since IPO, the logarithm of stock return volatility, retained earnings (# re/# at), stock options outstanding (# optosey/# csho), leverage ((# dltt + # dlc)/# at), the logarithm of total assets (# at), free cash flows ((# oibdp − (# txt − # txditc + lagged # txditc) − # tie − # dvp − # dvc)/(# prcc_f × # csho)), and stock returns. To come up with a prediction of total payout, we use the entire COMPUSTAT population from 2000 to 2008 to estimate a Tobit regression of total payouts on the above determinants, inclusive of year and industry fixed effects.…”

Section: Methodsmentioning

confidence: 99%

Accounting Conservatism and Performance Covenants: A Signaling Approach

Callen

Chen

Dou

et al. 2015

Contemporary Accting Res

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This study examines the relation between performance covenants in private debt contracting and conservative accounting under adverse selection. We find that under severe adverse selection (i.e., high information asymmetry), accounting conservatism and performance covenants act as complements to signal that the borrower is unlikely to appropriate wealth from the lender. No such relation obtains in a low information asymmetry regime. We further show that in the high information asymmetry regime, borrowers with high levels of conservatism and tight performance covenants generally enjoy lower interest rate spreads than borrowers with low levels of conservatism and loose performance covenants. Consistent with our signaling theory, in the high information asymmetry regime, borrowers with high levels of conservatism and tight performance covenants are less likely to make abnormal payouts to shareholders. Our empirical results are robust to alternative measures of conservatism and covenant restrictiveness. R ESUM ELes auteurs etudient la relation entre les clauses restrictives li ees a la performance dans les contrats d'emprunt sur le march e priv e et la prudence comptable en situation d'antis election. Ils constatent que lorsque l'antis election est marqu ee (c'est-a-dire lorsque l'asym etrie de l'information est importante), la prudence comptable et les clauses restrictives li ees a la performance jouent des rôles compl ementaires dans le signalement du fait * Accepted by Sudipta Basu. We are indebted to Sudipta Basu and two anonymous reviewers of this journal for their guidance and constructive comments. We also thank que l'emprunteur est peu susceptible de s'enrichir aux d epens du prêteur. Aucune relation de cette nature n'est observ ee en situation de faible asym etrie de l'information. Les auteurs montrent au surplus que lorsque l'asym etrie de l'information est importante, les emprunteurs qui affichent des niveaux elev es de prudence et sont assujettis a des clauses restrictives rigoureuses en mati ere de performance b en eficient g en eralement d' ecarts de taux d'int erêt moins grands que les emprunteurs dont les niveaux de prudence sont faibles et qui sont assujettis a des clauses restrictives peu exigeantes en mati ere de performance. Conform ement a leur th eorie de la signalisation, les auteurs constatent qu'en situation d'asym etrie de l'information importante, les emprunteurs qui affichent des niveaux elev es de prudence et sont assujettis a des clauses restrictives rigoureuses en mati ere de performance sont moins susceptibles de proc eder a des distributions anormales aux actionnaires. Les r esultats empiriques de l' etude r esistent aux diff erentes mesures de la prudence et de la rigueur des clauses restrictives.

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Section: Methodsmentioning

confidence: 99%

Accounting Conservatism and Performance Covenants: A Signaling Approach

Callen

Chen

Dou

et al. 2015

Contemporary Accting Res

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“…I follow the sample selection criteria used by recent studies (Grullon et al., ) in the related literature. My sample includes US firms with available dividend data and accounting information from Compustat and stock price information from CRSP in the period from 1990 to 2010.…”

Section: Data Sample Selection and Summary Statisticsmentioning

confidence: 99%

Local Culture and Dividends

Ucar¹

2015

Financial Management

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I empirically investigate whether geographical variations in local culture, as proxied by local religion, affect dividend demand and corporate dividend policy for a large sample of US firms. Firms located in Protestant counties are more likely to be dividend payers, initiate dividends, and have higher dividend yields, while firms located in Catholic counties are less likely to be dividend payers and have lower dividend yields. There is a geographically varying dividend clientele effect consistent with the variations in risk aversion among different cultural groups. My results suggest that firms largely held by local investors determine their corporate policies in line with local culture.

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“…Although they note that agency models predict that lower agency costs will result in higher total payout over time, when the payout occurs can depend on the firm's investment opportunities and life cycle. Hence, we include in our multivariate regression analysis of payout the proxies for institutional monitoring described above, as well as 12 other firm characteristics possibly related to payout policy (Grinstein and Michaely ; Grullon et al, ): Size is the natural log of sales reported by Compustat, measured in millions of dollars. Market to Book is the market value of common equity reported by Compustat divided by the book value of common equity. Excess Return is the annual stock return adjusted by the CRSP value‐weighted annual return. Beta is calculated by regressing daily stock returns for the year onto the CRSP value‐weighted daily returns. Age is the number of months since the firm's first return is reported in CRSP. Market Return on Assets is operating income before depreciation divided by the firm's total market value Sales Growth is calculated as the percentage change in sales revenue reported in Compustat over the previous year. Stock Volatility is calculated from CRSP as the firm's standard deviation of daily stock returns for the year. Retained Earnings is retained earnings reported in Compustat scaled by market value of common equity. Sales Diversity is a Herfindahl index of sales diversification within a firm's operating segments; segments are categorized by four‐digit SIC codes. Change in Sales Diversity is the difference between Sales Diversity for the current and prior fiscal year Dual Class Dummy is a binary variable indicating a firm has two classes of common stock, one of which has inferior voting rights. …”

Section: Methodology and Quantitative Resultsmentioning

confidence: 99%

“…Though Table does not provide variable averages by year, we nevertheless note that total payout does not exhibit dividends' well‐documented time trend. As Grinstein and Michaely () and Grullon et al () show, dividend payout has steadily declined since the 1980s while repurchases have steadily grown. Therefore, although dividends average 0.91% of assets in the first third of the sample and repurchases average only 0.79% (total payout: 1.70%), in the final third of the sample dividends average 0.58% of assets and repurchases 1.31% (total payout: 1.89%).…”

Section: Data Set Description and Measures Of Monitoringmentioning

confidence: 97%

Do Motivated Institutional Investors Monitor Firm Payout and Performance?

Nagel

Qayyum

Roskelley

2015

J of Financial Research

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We document a positive relation between shareholder monitoring and total payout to shareholders using two monitoring proxies that jointly consider an investor's ability and incentive to monitor. We find that this relation is even stronger for firms with poor growth options and with greater potential for agency problems. Unlike traditional proxies, our two proxies do not exhibit any endogeneity with payout policy. We further show that monitoring is positively associated with future improvements in payout and operating performance. These findings are consistent with the prediction that shareholder monitoring leads to higher payout through increased efficiency and reduced agency costs.

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Has the Propensity to Pay Out Declined?

Cited by 91 publications

References 21 publications

Accounting Conservatism and Performance Covenants: A Signaling Approach

Accounting Conservatism and Performance Covenants: A Signaling Approach

Local Culture and Dividends

Do Motivated Institutional Investors Monitor Firm Payout and Performance?

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