Equity agency costs are important to the firm and the management of these costs is a critical element of corporate governance, yet empirical research that focuses on the magnitude and impact of agency costs is limited. This thesis sets out to furnish empirical evidence in the area of corporate ownership with a particular focus on the magnitude of equity agency costs as well as the relation that exists between the largest shareholder in a firm and equity agency costs and between the largest shareholder and the dividend policy that a firm adopts. This thesis provides an empirical analysis of the effect of corporate ownership, together with other governance mechanisms on equity agency conflicts for the largest 500 Australian listed firms. The results from this analysis provide strong support for the view that equity agency costs are related to corporate ownership. Specifically, there is evidence of a significant non-linear relation between inside ownership and the proxies for agency costs. Further, the results demonstrate that other governance mechanisms, particularly board size, board leadership and short-term debt financing, are effective in improving the use of firm assets, yet they do not seem to restrain firm management from incurring excessive discretionary operating expenses. This thesis also extends the investigation of the corporate ownership-equity agency cost relation by focusing on the largest shareholder for 9,165 listed firms drawn from 43 countries around the world. The results suggest that cross-sectional variation in equity agency costs can be partly attributable to corporate ownership. Specifically, there is evidence of a statistically significant non-linear relation between the shareholding of the largest shareholder and the agency cost proxies. The type of the largest shareholder, i.e. whether the largest shareholder is an insider or a financial institution, is also important in analysis of this relation. Further, debt financing, dividend policy and legal origin vary in their impact on the agency cost proxies. This thesis also investigates the interaction between the largest shareholder and dividend policy for 8,279 listed firms drawn from 37 countries around the world. Consistent with previous studies, the results suggest that firms are more likely to pay dividends when profitability is high, debt is low, investment opportunities are limited, or when the largest shareholder is not an insider. It is also apparent that largest shareholding and dividend payout are related and that, consistent with the extant literature, legal system does matter in dividend policy decisions. Together, the results imply that equity agency costs vary with corporate ownership though this relation remains, of course, the subject of continuing investigation in finance. A major contribution of this thesis is demonstrating that corporate ownership, particularly the largest shareholder, plays a pivotal role in controlling agency costs. Accordingly, this suggests the following policy implication: by improving the legal environment and regulatory constraints imposed on large shareholders as well as legal protection for minority shareholders, the efficiency gains generated from large shareholder control can be translated into higher firm valuation to the benefit of all shareholders in the firm.

This thesis examines how industry differences affect both corporate financial policies and valuation. Chapter 1 studies the impact of a firm‟s product market power, through the channel of business risk, on its dividend policy. Using three measures of market power – the Herfindahl-Hirschman index, the degree of import competition and the Lerner Index, I find that market power positively affects a firm‟s dividend decision, both in terms of the probability of paying a dividend and the amount of the dividend. I also provide evidence that the route through which market power affects the dividend decision is business risk: a firm with greater market power is less risky and hence more likely to pay dividends and pay more dividends. Chapter 2 examines industry differences on the level of corporate cash holdings since the 1970s with a focus on high-tech versus non-high-tech firms. In contrast to the average cash-to-assets ratio of non-high-tech firms, which remained stable at a level close to that of the 1970s, the average cash ratio of high-tech firms more than tripled from 1980 to 2007. I find that this difference can be explained by changing firm characteristics across these two industrial sectors. This is due to high-tech new listings, whose changing characteristics and increasing proportion have caused the population characteristics of the high-tech sector to tilt toward those typical of firms that hold more cash. Chapter 3 investigates the industry impact on the marginal value of corporate cash holdings and how it has evolved over time. I find that on average the difference in the marginal value of cash between high-tech and non-high-tech firms has become larger during the sub-period which covers the 1990s and 2000s, as compared to earlier time periods. Furthermore, I show that this increase can be explained by changing firm characteristics related to the precautionary demand for holding cash. Overall, this thesis shows that industry differences, represented by varying degrees of market power and changing firm characteristics, have significantly affected corporate financial policies, both in terms of dividend policy and optimal cash holdings.

Given the importance of historical dividend policy to firms, I investigate whether dividend payers manipulate earnings through real activities to smooth dividend levels and dividend payout ratios. Using Compustat’s Execucomp database, I find evidence that dividend policy impacts both upward and downward real earnings management. I find that payers manipulate earnings upward through real activities to mitigate the shortfall of pre-managed earnings relative to prior year dividends when pre-managed earnings are lower than dividends paid in the prior year, suggesting that dividend levels are an important earnings benchmark. I document a stronger relationship between changes in pre-managed earnings and real earnings management for payers than for non-payers, suggesting that dividend policies impact real earnings management. Consistent with the importance of dividend policy in real earnings management, I show that dividend payers that follow conservative dividend policies manipulate earnings to a greater extent than dividend payers that do not follow conservative dividend policies.

This thesis examines how industry differences affect both corporate financial policies and valuation. Chapter 1 studies the impact of a firm‟s product market power, through the channel of business risk, on its dividend policy. Using three measures of market power – the Herfindahl-Hirschman index, the degree of import competition and the Lerner Index, I find that market power positively affects a firm‟s dividend decision, both in terms of the probability of paying a dividend and the amount of the dividend. I also provide evidence that the route through which market power affects the dividend decision is business risk: a firm with greater market power is less risky and hence more likely to pay dividends and pay more dividends. Chapter 2 examines industry differences on the level of corporate cash holdings since the 1970s with a focus on high-tech versus non-high-tech firms. In contrast to the average cash-to-assets ratio of non-high-tech firms, which remained stable at a level close to that of the 1970s, the average cash ratio of high-tech firms more than tripled from 1980 to 2007. I find that this difference can be explained by changing firm characteristics across these two industrial sectors. This is due to high-tech new listings, whose changing characteristics and increasing proportion have caused the population characteristics of the high-tech sector to tilt toward those typical of firms that hold more cash. Chapter 3 investigates the industry impact on the marginal value of corporate cash holdings and how it has evolved over time. I find that on average the difference in the marginal value of cash between high-tech and non-high-tech firms has become larger during the sub-period which covers the 1990s and 2000s, as compared to earlier time periods. Furthermore, I show that this increase can be explained by changing firm characteristics related to the precautionary demand for holding cash. Overall, this thesis shows that industry differences, represented by varying degrees of market power and changing firm characteristics, have significantly affected corporate financial policies, both in terms of dividend policy and optimal cash holdings.

The stock market returns are the readily available tool for the investor to make investment decision and stock market return are affected by many accounting variables. Dividend policy measures and stock return relationship has been examined from decades but result is still a dilemma. This study is a step forward to solve this dilemma by considering Karachi stock exchange, Pakistan and Nordic stock markets and conducting a comparative study to also provide a knowledge base to readers. Dividend yield ratio, dividend payout ratio and other accounting variables are examined to find their effect on stock return. Pooled least square regression has been used on the data ranging from 2005-2008 and findings are different in different markets. Dividend policy measures (dividend yield ratio and dividend payout ratio) have significant effect on the stock return and in most countries there is significant negative relationship.

The objective of this study is to examine the dividend policy measures effect on the stock prices. A sample of 171 listed companies from Karachi Stock Exchange, Pakistan is examined for a period from 1998 to 2006. The dependent variable stock price volatility is regressed against the dividend policy measures (independent variables) e.g., dividend yield, dividend payout ratio, actual cash dividends and dividend to total assets of the firm, after controlling for firms’ profitability, liquidity, gearing, size and growth. This study finds that, dividend policy measures have strong effect on the stock market prices but results are contradictory to earlier research in Pakistan. Dividend payout and actual cash dividends have negative, significant relationship with stock prices and dividend yield have significant positive relationship with stock market prices.

Investment, financing and dividend policies are critical for firms. The natures of these three policies may be significantly influenced by bankers on the board. Previous studies have examined the relationship between financing policy and bankers on the board. However, the influence of bankers on the board on corporate investment and dividend policies remains unexamined. Therefore, this paper tries to shed further light on whether bankers on the board affect corporate investment-cash flow sensitivity and dividend policy. This study collects data from Taiwan publicly traded corporations that have banker directors between 2003 and 2007, together with a matching sample consisting of firms without banker directors. Variables used to construct empirical analyses are from the Taiwan Economic Journal (TEJ) database. The results show that the presence of bankers appointed to corporate directors and the percentage of banker directors positively affect the firm¡¦s investment-cash flow sensitivity positively. This study also finds a negative relationship between the presence of banker directors and the likelihood of dividend payment. The percentage of banker directors has negative impacts on the likelihood of dividend payment and corporate dividend payout ratio.

The purpose of the article is to analyze the relationship among dividend policy,future earnings and growth opportunities.And the results are below: 1.Total dividend and cash dividend can predict future earnings,but stock dividend can only reflect current earnings 2.total dividend and stock dividend are signaling effect,but I have a diffent result in cash dividend. Using MBA,MBE and E/P as substitute variables,it is contracting effect.But using R&D as a substitute variable,it is signaling effect.

The typical theoretical work on dividend policy suggests five possible imperfections that management should consider. They are taxes, asymmetric information, an incomplete contract, institutional constraints and transaction costs. Different from the typical framework, this dissertation is to study the optimal dividend poly with heterogeneous beliefs among investors. The first model in this study has analyzed investment/dividend policy with heterogeneous beliefs-the full information model in a frictionless economy with divergent types of shareholders. A high dividend policy is optimal with limited endowment for the optimistic investors as the stocks are sold not only to type-o investors, but also to at least one type-p investor holding some shares. A low dividend policy is appropriate with cash dividend D= X0-ao+1 is optimal as the shares are sold only to the type-o investors. Heterogeneous beliefs of investors change dividend policy given the same information even under full information. Following the Miller and Rock (1985) theory, the second model in this dissertation has analyzed heterogeneous beliefs among investors-the two period model in leading to changing a firm¡¦s optimal dividend policy. A firm¡¦s optimal dividend policy is changed not only by the ratio of the pessimistic to optimistic investors, but also heterogeneous beliefs. An increase in the ratio of pessimistic to optimistic investors will result in a higher dividend. On the other hand, as the beliefs of both optimistic and pessimistic investors increase, i.e. a new biotechnology is innovated, a relative low dividend policy is appropriate. Based on the previous analysis, the results show that optimal dividend policy with heterogeneous beliefs among investors in a firm¡¦s earnings exists under heterogeneous beliefs framework. A firm¡¦s optimal dividend policy is different from that of the MM dividend invariance theorem. It is not because of taxes, asymmetric information, incomplete contracts, institutional constraints and traction costs, but heterogeneous beliefs of investors.

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.