This study examines the markets reaction to announcements of dividend increases. In particular, it considers the factors that affect the magnitude of abnormal returns during the days that surround announcements of dividend increases. The objective is to find whether the market reaction to dividend increases has weakened with the passage of time and whether market conditions affect the reaction. Eventually, this study is expected to reveal whether dividends continue to be important to investors. <p>This research is motivated by the findings of Fama and French (2001). They suggest that since 1978 firms have had a declining propensity to pay dividends. They propose that dividends are declining as a result of the ease by which investors can make homemade dividends through selling small portions of their holdings. They argue that recent market developments, particularly the introduction of negotiated commissions and discount brokers, have made homemade dividends easier and less costly. Their results may suggest that investors are now less interested to receive dividends than in the past. One objective of this study is to examine whether investors preferences regarding dividend payments have changed over time. This is accomplished by measuring the abnormal returns following announcements of dividend increases. Benartzi, Michaely, and Thaler (1997) suggest that the reaction of the market to dividend increases is an acceptable method of determining the value of dividends to investors. <p>In addition, this study explores the theoretical factors that may affect dividend valuation. Previous studies, such as Allen, Bernardo and Welch (2000), suggest that the existence of debt holders and institutional investors reduce the potential for agency costs as these stakeholders monitor managers. In contrast, Jensen (1986) suggests that high cash flows make it easier for managers to spend on perquisites and empire building. Thus, the potential for agency costs increases. Therefore, paying dividends when cash flows are high reduces the likelihood of agency costs. At the same time, Benartzi, Michaely and Thaler (1997) suggest that increasing dividends following higher cash flows signals managements expectation that future performance warrants a dividend increase. Consequently, the agency and signaling theories suggest that investors may react positively to dividend increases when cash flows are high. <p>Several observations are obtained from this study. First, investor reaction to dividend increases seems to have weakened over time. Second, the reaction is different when the increase is announced in a bear market rather than in a bull market. Third, the market reaction to dividend increases is less in firms that are more liquid. This finding may be interpreted as evidence that dividends are valued less in more liquid firms because it is easier for the investors of these firms to make homemade dividends. Fourth, the magnitude of the reaction is directly related to the increase in trading volume following the announcement. <p>Surprisingly, the evidence disputes the predictions of the agency cost theory of dividends. This theory states that dividends are valued because they decrease the amount of cash available to management, which in turn decreases the potential for waste. Given this theory, it is expected that firms with high debt loads already have agency costs decreased so the market reaction to their dividend increases would be less than other firms while firms with high free cash flows would have a greater market reaction to their dividend increases because of the large potential for waste on managements part. Instead, the results suggest that firms with high debt loads experience positive market reaction following dividend increases while firms with large free cash flows experience negative reactions. It seems that the signaling theory of dividends is contributing heavily to this result.<p>Future research should be directed to investigate the possibility that share repurchases may be replacing dividends as a way to redistribute surplus cash to shareholders. In addition, future studies may focus on the signaling theory of dividends as useful tool to explain the dividend policies of corporations.

This study examines the markets reaction to announcements of dividend increases. In particular, it considers the factors that affect the magnitude of abnormal returns during the days that surround announcements of dividend increases. The objective is to find whether the market reaction to dividend increases has weakened with the passage of time and whether market conditions affect the reaction. Eventually, this study is expected to reveal whether dividends continue to be important to investors. <p>This research is motivated by the findings of Fama and French (2001). They suggest that since 1978 firms have had a declining propensity to pay dividends. They propose that dividends are declining as a result of the ease by which investors can make homemade dividends through selling small portions of their holdings. They argue that recent market developments, particularly the introduction of negotiated commissions and discount brokers, have made homemade dividends easier and less costly. Their results may suggest that investors are now less interested to receive dividends than in the past. One objective of this study is to examine whether investors preferences regarding dividend payments have changed over time. This is accomplished by measuring the abnormal returns following announcements of dividend increases. Benartzi, Michaely, and Thaler (1997) suggest that the reaction of the market to dividend increases is an acceptable method of determining the value of dividends to investors. <p>In addition, this study explores the theoretical factors that may affect dividend valuation. Previous studies, such as Allen, Bernardo and Welch (2000), suggest that the existence of debt holders and institutional investors reduce the potential for agency costs as these stakeholders monitor managers. In contrast, Jensen (1986) suggests that high cash flows make it easier for managers to spend on perquisites and empire building. Thus, the potential for agency costs increases. Therefore, paying dividends when cash flows are high reduces the likelihood of agency costs. At the same time, Benartzi, Michaely and Thaler (1997) suggest that increasing dividends following higher cash flows signals managements expectation that future performance warrants a dividend increase. Consequently, the agency and signaling theories suggest that investors may react positively to dividend increases when cash flows are high. <p>Several observations are obtained from this study. First, investor reaction to dividend increases seems to have weakened over time. Second, the reaction is different when the increase is announced in a bear market rather than in a bull market. Third, the market reaction to dividend increases is less in firms that are more liquid. This finding may be interpreted as evidence that dividends are valued less in more liquid firms because it is easier for the investors of these firms to make homemade dividends. Fourth, the magnitude of the reaction is directly related to the increase in trading volume following the announcement. <p>Surprisingly, the evidence disputes the predictions of the agency cost theory of dividends. This theory states that dividends are valued because they decrease the amount of cash available to management, which in turn decreases the potential for waste. Given this theory, it is expected that firms with high debt loads already have agency costs decreased so the market reaction to their dividend increases would be less than other firms while firms with high free cash flows would have a greater market reaction to their dividend increases because of the large potential for waste on managements part. Instead, the results suggest that firms with high debt loads experience positive market reaction following dividend increases while firms with large free cash flows experience negative reactions. It seems that the signaling theory of dividends is contributing heavily to this result.<p>Future research should be directed to investigate the possibility that share repurchases may be replacing dividends as a way to redistribute surplus cash to shareholders. In addition, future studies may focus on the signaling theory of dividends as useful tool to explain the dividend policies of corporations.

Based on the trend of dividend payout ratio from 1986 to 2004 in Taiwan, it appears the companies have experienced two different stages of cash dividend policies. Before 1997, the cash dividend payout ratio declines slowly. But starting 1998, the payout ratio raises substantially, and the sum of cash dividend appears the same trend. Investigate the companies that pay cash dividend out, discover that they concentrate on those make a earning, and focus on those have high profit year by year. The sample is selected from listed companies in Taiwan Stock Market from 1988 to 2004 , not including financial and utility companies. This thesis uses binary logistic regression to test the relationship between company¡¦s characteristics and paying cash dividend, and survey whether this characteristics are the reason to make the cash dividend payout ratio raises quickly. The result of this research found that there is positive relationship between the payout of cash dividend, the company size, profitable ability, and free cash flow ratio. Moreover, there is negative relationship between the payout of cash dividend, growing opportunity, and liability ratio. But among the two variables measuring the growing opportunity, the asset growing ratio has a better interpretation in the earlier stage; and the market-to-book ratio does in the later stage. On the base period of 1988 to 1997, use binary logistic regression and portfolios to set up a model to fit the cash dividend policies. The overall empirical evidence implies the company¡¦s characteristic don¡¦t change the companies¡¦ tendency of paying cash dividend. In other words, the phenomenon of cash dividend payout ratio raising actually is caused by the increasing fundamental tendency of the sample companies paying cash dividend.

這篇論文主要在探討以不同融資方式為主的經濟體，是否會對個別公司的股利政策造成影響，我們針對15個國家1244家公司作探討，發現在以銀行債為主要融資方式的國家，個別公司相對發放較低的股利，並且現金股利亦呈現較高的波動度，顯示資訊不對稱的嚴重性，是造成不同資本市場有不同股利政策的原因之一。 / Abstract This paper examines whether differences in the sophistication of capital markets drive dividend policies to vary across countries, by studying on dividend policies of 1244 firms in 15 countries. We find that reliance on banking sector causes lower dividend payout and incentives for dividend smoothing. The same relationship is also found between quality of accounting system and dividend policies. These results confirm that less information asymmetry defuses the need for using dividends as signaling and discipline tools. Furthermore, we find that there exists a positive relation between development of stock market and payout level. This indicates that more important the stock in providing capital to firms, the more likely the firms increase their dividend payout. Finally, some evidences support that a shorter investment horizon leads to a higher payout ratio and a higher extent of dividend smoothing.

本文根據32個國家的資料，觀察是否代理問題嚴重的公司傾向發放較多股利。以股權集中度作為代理問題之代理變數，發現保護好的國家，以股權分散的公司居多，而在保護不好的國家，大部分的公司股權結構十分集中。所以在保護好的國家，主要是股東與經理人之間的代理問題，股權越分散，代理問題越大；而保護不好的國家，其主要的代理問題是介於大股東與小股東之間，股權越集中，代理問題越大。 最後結論得出：在投資人保護好的國家，股利發放與股權集中度呈現正向關係；而在投資人保護差的國家，股利發放與股權集中度則呈現負向關係。代表代理問題嚴重的公司傾向發放較多的股利，由於公司有外部融資的需求，儘管在投資人保護差的國家，公司仍會藉由發放股利來減輕代理問題。 / We use a sample of companies from 32 countries around the world to shed light on the relationship between dividend payouts and insider holdings. Schooley and Barney (1994) indicate that negative relationship between dividend payouts and ownership exists before a turning point; once managerial ownership exceeds the turning point, it switches to a positive one. Also, as La Porta et al. (2000) point out, legal protection causes that widely-held firms dominate in a protected environment and closely-held firms in an unprotected one. So, most research addresses a negative relationship between dividend payouts and ownership. It is because their samples are usually composed of firms in a protected environment, where widely-held firms are the normality. By contrast, in countries with poor shareholder protection, closely-held companies prevail, and most of their ownership is coupled with control. Dividends thus become a tool for controlling shareholders to signal the moderation of expropriation and to reduce agency costs. Because firms with more concentrated ownership have less cost to pay dividends and need to allay the concerns about expropriation, it implies that more dividends are paid as the insider holdings increase. We surmise a positive relationship between ownership and payouts can be observed in an unprotected environment. The empirical evidence supports our hypothesis.

1 Summary The topic of this diploma thesis is taxation of companies' income. The aim of the thesis is to describe and introduce question following from the application of income tax act to the companies. The accent is put on the taxation of dividends. Taxation of companies' income plays a vital role in decision making process of domestic as well as foreign investors where to invest their finances. The thesis is focused on the analysis of Czech tax legislation made through a comparison with the Slovak basic tax legislation. The first chapter deals with the delimitation of core concepts related to the taxation of incomes. It focuses on the income tax act, aspect of natural person's taxation and artificial person's taxation. The second chapter is concerned of characteristic related to taxation of personal companies and stock corporations. The third chapter presents basic terms of dividend's taxation on the domestic as well as on the international level such as the core concept of dividend or tax domicile. The fourth chapter examine the European tax legislation and harmonization of tax legislation within the European Union. The fifth chapter illustrates taxation of domestic payment of dividends and its characteristics related to the natural and artificial person as recipients of dividends. The sixth chapter...

<p>The Swedish business cycle is in a strong position at the moment, leading to great results and larger profits. This strong business posture has encouraged companies to increase both their liquidity and revenue. Now there is a dilemma, what actions should or could a respectable business take on these newfound liquid assets.</p><p>The purpose of this paper is to deliver a clear picture of what options there are for such companies listed on the Swedish stock-market, and how the market wants them to act. To these means we have studied the basic theories linked to this subject and reviewed the cause and effects that motivates them. We have also conducted interviews with the people representing the market through their line of business.</p><p>In the theory we found several options on what companies in similar situations tend to do. They can either hand out share dividends to stock owners, repurchase own company stocks, acquire financial assets or make acquisitions of companies. Through interviews with the people within the financial market, we have been able to establish the empirical facts necessary to analyse the theory we’ve brought forward and draw the following conclusions. The alternatives available and that the market agrees to can be ranked with company acquisitions as first, secondly share dividends and lastly repurchase of own company stock. However the market do not want a company to acquire financial assets, as long as it isn’t their core business.</p>

The Swedish business cycle is in a strong position at the moment, leading to great results and larger profits. This strong business posture has encouraged companies to increase both their liquidity and revenue. Now there is a dilemma, what actions should or could a respectable business take on these newfound liquid assets. The purpose of this paper is to deliver a clear picture of what options there are for such companies listed on the Swedish stock-market, and how the market wants them to act. To these means we have studied the basic theories linked to this subject and reviewed the cause and effects that motivates them. We have also conducted interviews with the people representing the market through their line of business. In the theory we found several options on what companies in similar situations tend to do. They can either hand out share dividends to stock owners, repurchase own company stocks, acquire financial assets or make acquisitions of companies. Through interviews with the people within the financial market, we have been able to establish the empirical facts necessary to analyse the theory we’ve brought forward and draw the following conclusions. The alternatives available and that the market agrees to can be ranked with company acquisitions as first, secondly share dividends and lastly repurchase of own company stock. However the market do not want a company to acquire financial assets, as long as it isn’t their core business.

This study examines the unique patterns of dividend polices, including cash-only, stock-only, and dual dividends, the presence of dividend catering situations, and the factors driving the dividend decisions of Taiwanese firms. After the late 1990s, the proportion of firms paying dual dividends or cash-only dividends has risen gradually while the percentage of firms paying stock-only dividends has fallen sharply. Dividend premiums are related to not only the dividend decision, but also dividend changes and the magnitude of dividend changes. When one type of dividend premium (i.e. cash dividend) is high, managers are more likely to issue the same type of dividend and less likely to issue the other type of dividend (i.e. stock dividend). Firms are more likely to increase cash dividends when cash dividend premiums are high and raise the magnitudes of cash and stock dividends when cash and stock dividend premiums are high, respectively. Catering persists even after controlling for the effect of a firm¡¦s characteristics, risk, external policy, and macroeconomic situations. Other important determinants of the decision to pay or change dividends are also identified herein. This study offers a comprehensive understanding of all types of dividend payout practices in the Taiwan stock market.

We propose an asset pricing model in a production economy where cash flows are determined by firms' optimal dividend and investment decisions. Extensive and intensive decision margins in dividend payout are modeled with cash holding and investment adjustment costs. The model implies that delays in dividend distribution of young and growing firms play instrumental roles in explaining various asset pricing anomalies. Quantitative results show that model-implied dividend policies and investments are consistent with data, and the cross sections of stock returns are well explained by the interactions between productivity shocks and the lumpy dividend policies. Additionally, the model produces countercyclical variations in the market risk premium. In addition, we empirically investigate the relevance of firm characteristics and aggregate productivity shocks in determining dividend payment propensity, thereby asset prices. It is found that excess returns for dividend payers over nonpayers are significantly linked to business cycles. Relative future returns are fairly predicted by the spread of lagged propensities to pay dividends. Furthermore, the empirical results document that each future return of payers and nonpayers increases in propensities to pay out cash to shareholders. These results are consistent to our rational expectations model of dividend policy, and contradictory to the catering theory of dividends.