On the financial characteristics of firms that initiated new dividends during a period of economic recession and financial market turmoil

Payne, Bruce C.

doi:10.1007/s12197-009-9084-4

Cited by 9 publications

(6 citation statements)

References 13 publications

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“…In total, 65 dividend initiating firms (DIF) are matched randomly with 65 firms from the same industry to find financial profiles that can predict new DIF in a future economic downturn (Payne, 2009). Payne found "the greater the following: cash flow per share, price stability, earnings predictability, and return to total capital, the more likely the firm would initiate new dividends […]" (Payne, 2009). The larger the ratio of market value to book value, the less chance of a firm becoming a DIF.…”

Section: Introductionmentioning

confidence: 99%

“…The converse is not stated. Instead it is concluded that the ratio of market value to book value "was not a characteristic of DIF" (Payne, 2009). Payne's purpose was to find a financial profile for DIF that can be used for predicting future DIF in a new financial period of distress.…”

Section: Introductionmentioning

confidence: 99%

“…The relevant comparison is between DIF and traditional dividend firms (TDF). This study will not compare to non-dividend paying firms as Payne (2009) did. The question to be answered here asks if DIF are rewarded at a higher rate than TDF during the 2008 economic downturn.…”

Section: Introductionmentioning

confidence: 99%

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Dividend initiators, winners during 2008 financial crisis

Consler

Lepak

2016

Managerial Finance

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Purpose – The purpose of this paper is to describe and compare the mean response for selected financial variables in three dividend paying groups before and after the financial crisis of 2008. Dividend initiators are expected to be rewarded by investors over traditional dividend paying firms. Design/methodology/approach – Quarterly CRSP data from 2000 to 2012 are used to define dividend paying groups. Highly unbalanced financial data on dividend paying firms are analyzed in two truncated sample periods defined before and after the financial crisis. Fitted models describing differences in dividend paying groups are based on the linear mixed model representation of penalized splines with random effects to account for repeated measures over time. Findings – Results are presented on the important differences in selected financial variables before and after the financial crisis by dividend paying pattern group (traditional, initiators, residual/catering). Special emphasis is given to the analysis of market/book value ratio. Results demonstrate dividend initiators are rewarded over traditional dividend firms by investors. Firms with an intermittent paying pattern have no advantage. All dividend paying firms grow during the 2008 financial crisis. Traditional dividend payers have larger size than other dividend payers. The size effect explains results for several of the financial variables studied. Research limitations/implications – Future work can include an industry effect on the three dividend paying groups. Practical implications – Investors appear to prefer certainty as to when they receive a dividend over uncertainty, especially in times of economic downturn and economic recovery. Social implications – Enhanced awareness that different payment patterns exist and are rewarded differently over time on both the corporate issuer and investor sides. Originality/value – This study adds to body of knowledge of practical dividend payment patterns around a financial crisis. It also provides added support for dividend initiators.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Dividend initiators, winners during 2008 financial crisis

Consler

Lepak

2016

Managerial Finance

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“…The current study will focus attention on firms with low liquidity ratios and high debt ratios looking for similar results. Payne (2009) establishes a unique financial profile for dividend initiating firms during the most recent recession. A surprise was the ratio of market value to book value was not a characteristic of dividend initiating firms.…”

Section: Literature Reviewmentioning

confidence: 99%

Firm Characteristics Over Time by Dividend Payment Pattern and Firm Size

Consler

Lepak

Havranek

2015

JFI

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This paper examines relationships between four dividend payment patterns and firm size using seven relevant financial variables from prior studies. Growth rates on the means of these variables are obtained from CRSP using large sample (quarterly) data in the time span 2000 to 2012. The four dividend payment pattern groups represent traditional dividend theory, dividend irrelevance theory, dividend initiators, and a residual/catering theory approach. Results indicate that small firms following a traditional or a residual/catering payment pattern have been most attractive for investment purposes. Surprisingly, both small and large dividend initiators are not being rewarded by the market. Recommendations for future research are discussed.

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“…Payout decisions boil down to the opportunity expectations and preferences of managers and owners (with their own principal-agent related problems), as well as to how the decision will be perceived by other stakeholders (Below and Johnson, 1996;Golden and Kohlbeck, 2017). According to Fuller and Goldstein (2011) and Payne (2011), the revealing role of dividend decisions is further emphasised in declining markets, which allow to draw conclusions on reserves, future expectations, but also on the quality of corporate governance (Attig et al, 2016;Mehdi et al, 2017). In an uncertainty environment, dividend payout decisions are even more interesting, because without known risk distributions providing guidance, the potential of loss-taking for the company and the commitment of the owners to it become the dominant factors in these decisions (Hauser, 2013;Welker et al, 2017), besides an increasing stakeholder pressure on certain industries.…”

Section: Introductionmentioning

confidence: 99%

Dividend payout decisions under uncertainty: the ownership influence in the early days of the COVID-19 pandemic in Finland

Lindén

Lehner

Losbichler

et al. 2022

JAAR

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PurposeThis paper examines whether ownership type has a moderating influence on dividend payouts during the COVID-19 pandemic crisis with respect to changes in profits. Future uncertainties because of the pandemic will result in a perceived need for liquidity within the company, but retaining cash may be risky for shareholders who could look for less risky alternatives. The dividend payout strategy is thus even more closely related to the overall type concentration and strategy of the owners during the crisis.Design/methodology/approachThe effects are explored and tested on early data from 2019 to 2020 of Finnish companies using ANCOVA while controlling for profitability and sector variables.FindingsA significant effect on dividend payout during the COVID crisis was found when the companies are dominantly held by individual owners validating early suggestions on such an influence. Therefore, this study contributes further to the academic debates on the influence of ownership concentration in times of crises. This study lists certain sectors which experience diminished profits during such a crisis which pinpoints sector separation in future discussions.Research limitations/implicationsThis study explores early data from a specific context in the Nordic countries. However, it does so out of purpose as explained in the paper.Practical implicationsOwnership type and concentration matters when it comes to dividend payout decisions under uncertainty with regard to changes in profit. Investors need to accept these behavioural insights into their decisions.Originality/valueThis study examines the signalling effect of dividends by analysing how actual or anticipated change in profitability due to a crisis is reflected by owners and leads to dividend payout decisions under uncertainty.

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On the financial characteristics of firms that initiated new dividends during a period of economic recession and financial market turmoil

Abstract: Dividend Initation, Recession, Financial Market Turmoil, G 14, 32, 35,

Cited by 9 publications

References 13 publications

Dividend initiators, winners during 2008 financial crisis

Dividend initiators, winners during 2008 financial crisis

Firm Characteristics Over Time by Dividend Payment Pattern and Firm Size

Dividend payout decisions under uncertainty: the ownership influence in the early days of the COVID-19 pandemic in Finland

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