Dividend policy, agency costs and board independence

2018 ◽  
Vol 10 (1) ◽  
pp. 42
Author(s):  
Allam Mohammed Hamdan
Keyword(s):  
Agency Costs ◽  
Dividend Policy ◽  
Board Independence

Corporate governance and dividends payout: are they substitutes or complementary?

2015 ◽  
Vol 9 (2) ◽  
pp. 177-194 ◽  
Author(s):  
Samuel Jebaraj Benjamin ◽  
Mazlina Mat Zain
Keyword(s):  
Corporate Governance ◽  
Agency Costs ◽  
Negative Relationship ◽  
Board Independence ◽  
Board Meeting ◽  
Dividend Payout ◽  
Content Type ◽  
Significant Negative Relationship ◽  
The Relationship ◽  
Unique Relationship

Purpose – This paper aims to furnish incremental insights on dividends and corporate governance (CG) by addressing the relationship between board meeting frequency and board independence with dividend payout. In particular, this study aims to investigate whether CG attributes are substitutes to control agency problem within the Malaysian context. Design/methodology/approach – This paper examines panel data on a sample of 114 Malaysian firms (798 observations) for seven years from 2002 to 2008. Findings – Based on 798 firm-year observations for the period from 2002 to 2008, the results show significant negative relationship between CG (board independence, board meeting frequency) and dividend payout. This suggests that CG and dividend payout are substitutes in reducing agency costs. Our study provides empirical evidence consistent with the “substitution argument”, indicating that firms with weak CG need to establish reputation by paying more dividends. Specifically, the findings indicate that firms with a higher proportion of independent directors and boards of director that meet more frequent pay lower dividends. Originality/value – This paper provides evidence on previously untested governance characteristics in relation to how they act as substitute mechanisms with dividends for reducing agency costs. The results builds a strong case for the fresh strand of knowledge on dividends and CG which tests each CG variables to understand each of its unique relationship with dividends in line with the dividends outcome or substitute theory.

scholarly journals Impact of Taxes and Agency Costs on Dividend Policy

2006 ◽  
Vol 14 (3) ◽  
pp. 63-72 ◽  
Author(s):  
Pavel Kraus
Keyword(s):  
Agency Costs ◽  
Dividend Policy

scholarly journals Modelo de política óptima de dividendos

2017 ◽  
Vol 10 (20) ◽  
Author(s):  
Jorge Núñez Pérez ◽  
Juan Rositas Martínez ◽  
Manuel Medina Elizondo
Keyword(s):  
Information Content ◽  
Agency Costs ◽  
Dividend Policy ◽  
Binary Logistic Regression ◽  
Building Blocks ◽  
Agency Cost ◽  
General Context ◽  
Binary Logistic Regression Analysis ◽  
Definition Of ◽  
New Formulation

Keywords: agency costs, clienteles of dividends, information content of dividends, irrelevance of dividend policy, transaction costsAbstract. This research addresses one of the fundamental decisions of corporate finance: the dividend policy. It is formulated a model whose building blocks are the theory of irrelevance of the dividends of Modigliani and Miller (as a general context), the signaling model of John Lintner, and the model of Michael S. Rozzef of minimization of agency cost and transaction costs. The construction of the theoretical model of optimal dividend policy proposed here highlights the advantages of the axiomatic definition of the theory of Modigliani and Miller, by its logical contribution, and intends to propose a new formulation with respect to the determination of level of payment of dividends in the corporations. Therefore we relax the assumptions specified by Modigliani and Miller related to liquidity indifference, absence of uncertainty, agency costs and transaction cost, also we explore the possibility of presence of asymmetric information. In such circumstances, for the model exposed here and by means of a binary logistic regression analysis is tested the influence of profits, the information content of dividends, the clientele effect and agency costs to define policy dividends of the corporations in Mexico.Palabras clave: clientelas de dividendos, contenido informativo de los dividendos, costos de agencia, costos de transacción, irrelevancia de la política de dividendosResumen. Esta investigación aborda una de las decisiones fundamentales de las finanzas corporativas: la política de dividendos. Se formula un modelo cuyos bloques de construcción son la teoría de irrelevancia de los dividendos de Modigliani y Miller (como contexto general), el modelo de señalización de John Lintner, y el modelo de Michael S. Rozzef de minimización de costos de agencia y de costos de transacción. La construcción del modelo teórico de política óptima de dividendos aquí propuesto pone de relieve las ventajas de la definición axiomática de la teoría de Modigliani y Miller, en cuanto a contribución lógica, con la intención de acercarnos a una nueva formulación respecto de la determinación del nivel de pago de dividendos en las corporaciones. Para ello se relajan las suposiciones especificadas por Modigliani y Miller en relación a la indiferencia por liquidez, ausencia de incertidumbre, costos de agencia y costos de transacción, también se explora la posibilidad de presencia de información asimétrica. En dichas circunstancias, para el modelo aquí expuesto y mediante un análisis de regresión logística binaria se prueba la influencia de las utilidades, el contenido informativo de los dividendos, el efecto clientela y los costos de agencia para definir la política de dividendos de las corporaciones en México.

scholarly journals Dividend Policy, Agency Costs, and Earned Equity

2004 ◽  
Author(s):  
Harry DeAngelo ◽  
Linda DeAngelo ◽  
Ren� M. Stulz
Keyword(s):  
Agency Costs ◽  
Dividend Policy

scholarly journals BOARD COMPOSITION, OWNERSHIP STRUCTURE AND DIVIDEND POLICY IN PAKISTAN

2015 ◽  
Vol 03 (02) ◽  
pp. 30-39
Author(s):  
Usmna Azher ◽  
◽  
Syed Kahsif Saeed
Keyword(s):  
Ownership Structure ◽  
Dividend Policy ◽  
Positive Impact ◽  
Stock Exchange ◽  
Board Composition ◽  
Board Independence ◽  
Dividend Payout ◽  
Financial Firms ◽  
The Impact ◽  
Decision Board

The aim of this study was to examine the impact of board composition and ownership structure on dividend policy of the firms listed in Karachi stock exchange. For this purpose, the data of 150 non-financial firms from 2008 to 2012 was employed. This study used descriptive as well as fixed effect and logit models for the estimation purpose. Results showed that CEO Duality and ownership concentration have an insignificant impact on dividend policy. Profitability measures and institutional ownership showed a positive significant impact on both dividend payout ratio and dividend decision. Board independence showed a significant positive impact on dividend payout ratio; however, it remained insignificant in case of dividend decisions.

CORPORATE LIQUIDITY, DIVIDEND POLICY AND DEFAULT RISK: OPTIMAL FINANCIAL POLICY AND AGENCY COSTS

2010 ◽  
Vol 13 (04) ◽  
pp. 537-576 ◽  
Author(s):  
YANN BRAOUEZEC ◽  
CHARLES-ALBERT LEHALLE
Keyword(s):  
Default Risk ◽  
Agency Costs ◽  
Dividend Policy ◽  
Base Case ◽  
Financial Policy ◽  
Maturity Model ◽  
Corporate Liquidity ◽  
Optimal Dividend ◽  
Corporate Financial Policy ◽  
Optimal Dividend Policy

We study the simplest discrete-time finite-maturity model in which default arises when the firm is not able to pay its debt obligation using the current cash-flow plus the corporate liquidity. An important distinction is made between liquidity and solvency of the firm. The corporate financial policy is simultaneously defined by the dividend policy, and the leverage policy (the coupon and the principal of the bond). When the corporate financial policy implies no default risk and no taxes, we show that the corporate financial policy is irrelevant and this irrelevance result holds for any probability measure. When the corporate financial policy implies now some default risk, we show that the value of the firm is a piecewise decreasing function of the dividend policy for any leverage policy, so that dividend policy affects the value of the firm. However, shareholders may not always have the incentives to implement this optimal dividend policy. We show that when the value of the assets is low, shareholders have an incentive to deviate from this optimal dividend policy, and we also study the resulting agency costs. We finally compare the resulting quantities of our model to the base case suggested by Huang and Huang (2003).

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