Over the last two decades, share repurchases have emerged as the dominant payout channel, offering a more flexible means of returning excess cash to investors. However, little is known about the costs associated with payout-related financial flexibility. Using a unique identification strategy, we document a significant cost. We find that actual repurchase investments underperform hypothetical investments that mechanically smooth repurchase dollars through time by approximately two percentage points per year on average. This cost of financial flexibility is correlated with earnings management, managerial entrenchment, and less institutional monitoring. (C) 2016 Elsevier B.V. All rights reserved.

Problem: Stock repurchases, and dividends have been a topic of academic interest for decades. Researchers have been trying to understand the determinants of payout policies and the conjunctural relationship between dividends and repurchases. That is, under which circumstances is one preferred over the other. In this paper, we make an attempt to contribute to the already existing research on the area. For this purpose, we study a specific period in time when a tax reform was enacted. That way we hope to obtain information on the payout policy that companies choose, and how the taxes influence these Purpose: In this paper our aim is to find out, by using a sample of quarterly data prior and after the implementation of the 2012 (enacted in 2012 and put into effect in January 1, 2013) tax reform (four quarters prior and four quarters after), whether the payout policies are affected by the changes in the dividend and/or the capital gain tax. This may, in turn, reveal information about the dividends and repurchases and how corporations choose to respond to adjustments in taxes as explained by the dependent variables. Method: We perform multinomial logistic, fixed and random effects regression analyses to the quarterly data of companies listed on the United States stock market benchmark index, the S&P 500. We use descriptive statistics and theoretical fundamentals to establish a relationship between the dividends and repurchases policies, as the changes in the tax code come to effect. Results and Conclusion: Despite the size of the sample, we found that firms tend to prefer; 1) to do a combination of dividend and repurchases, and 2) when taxes increase, there is a positive effect on dividend, and that repurchases are preferred over dividends.

Firms that announce open-market share repurchase programs are not obligated to follow through in the actual acquisition of shares. In fact, we find that the majority of firms fail to acquire the target number of shares specified at announcement and many firms fail to repurchase any shares at all. Therefore, the announcement of a share repurchase program has a degree of uncertainty regarding the announcing firms credibility. This study examines the possibility that market participants evaluate the credibility of a firms share repurchase announcement based on the firms previous share repurchase history. We examine 1,507 share repurchase programs for firms listed on the Toronto Stock Exchange (TSX) from 1995 to 2005 and find that firms that have completed a higher proportion of previous share repurchase programs experience larger abnormal returns on the announcement of subsequent repurchase programs. Therefore, we conclude that the market reacts more favorably to the share repurchase announcements of credible firms compared to firms that lack credibility.

Firms that announce open-market share repurchase programs are not obligated to follow through in the actual acquisition of shares. In fact, we find that the majority of firms fail to acquire the target number of shares specified at announcement and many firms fail to repurchase any shares at all. Therefore, the announcement of a share repurchase program has a degree of uncertainty regarding the announcing firms credibility. This study examines the possibility that market participants evaluate the credibility of a firms share repurchase announcement based on the firms previous share repurchase history. We examine 1,507 share repurchase programs for firms listed on the Toronto Stock Exchange (TSX) from 1995 to 2005 and find that firms that have completed a higher proportion of previous share repurchase programs experience larger abnormal returns on the announcement of subsequent repurchase programs. Therefore, we conclude that the market reacts more favorably to the share repurchase announcements of credible firms compared to firms that lack credibility.

Utdelningspolitik är ett ämne inom finansieringsområdet som har varit flitigt omdiskuterat under många år. Huruvida branschen som företaget är verksam inom har en inverkan på utdelningspolitiken eller inte är ett område som det finns relativt lite forskning inom. Forskare är oense om branschen påverkar företagens utdelningsbeslut. Vissa hävdar att det finns branscheffekter vilket gör att företagens utdelningspolitik påverkas av branschen och som resulterar i att utdelning tenderar att se olika ut mellan branscher. Det finns också forskare som exempelvis Higgins (1972) som påstår motsatsen och menar att branschen inte har någon större påverkan utan att företagen bestämmer utdelningspolitiken utifrån deras egen situation. Uppsatsens syfte är att undersöka om det finns skillnader i utdelningspolitiken i sex olika branscher som jämförts. Det har gjorts genom att analysera utdelningsandelen från totalt 52 företag på OMX Stockholm under tidsperioden 2001-2011. För att jämföra om det finns skillnader mellan branscherna så har ett hypotestest och en regressionsanalys genomförts. Resultatet av undersökningen pekar på att det inte finns några skillnader mellan de undersökta branscherna, vilket tyder på en avsaknad av branscheffekter i utdelningspolitiken. / Payout policy is a controversial topic within corporate finance that has been discussed extensively for many years. Whether the industry that companies operate in has an impact on payout policy is an area that is less clear. Some researchers argue that there exist industry effects, which means that companies’ payout policy is influenced by the industries. On the contrary, there are also other researchers like Higgins (1972) who claim that industries do not have any impact on companies’ payout policy. Instead, companies decide the payout policy based on their own circumstances. This study aims to examine if there are any differences in payout policy among six different industries. By comparing the payout ratios of 52 companies from OMX Stockholm during the period 2001-2011, a hypothesis test and a regression analysis were performed. The result of the study indicates that there are no differences among these industries, which suggests a lack of industry effects in payout policy.

In this thesis, we explore the hidden risks in a firm’s real operating process and the financial adjustments made as the risk changes. We investigate the risks associated with a firm’s vertical channel (chapter 2 and 3) and geographic location (chapter 4), and analyze what financial consequences these risks bring. We firstly show strong evidence that a firm’s cost of equity decreases as supplier immobility translates into a decrease in operating leverage and systematic risk. Next, we show that as the specificity of customers induces more cash flow instability, the firm’s idiosyncratic risk increases with customer specificity. As a result, firms with more specific customers choose more conservative dividend payout policies to adjust for the risk changes. In the third essay, we examine the information risk from firm’s geographic location. We find that this information risk affects a firm’s capital structure choice and that centrally located firms have lower leverage ratios than do remotely located ones. / Thesis (Ph.D, Management) -- Queen's University, 2013-04-29 22:12:43.675

Submitted by JOSIANE SANTOS DE OLIVEIRA (josianeso) on 2017-11-17T12:01:56Z No. of bitstreams: 1 Felipe Camardelli_.pdf: 806963 bytes, checksum: 73109010eb46d57243e89942df327ba6 (MD5) / Made available in DSpace on 2017-11-17T12:01:56Z (GMT). No. of bitstreams: 1 Felipe Camardelli_.pdf: 806963 bytes, checksum: 73109010eb46d57243e89942df327ba6 (MD5) Previous issue date: 2016-04-29 / Nenhuma / Sob a perspectiva da Teoria da Agência, esta pesquisa investiga a influência da governança corporativa na determinação da política de dividendos das companhias listadas na BM&FBovespa. Essa influência é investigada em conexão com a vontade das companhias em pagar acima mínimo legal e contratual estabelecido. Para atingir este objetivo, um modelo de regressão de dados em painel com efeitos aleatórios foi aplicado sobre uma amostra de 759 observações no período de 2010 a 2013. Os resultados encontrados sugerem que: i) o segmento de governança em que estão listadas não afeta a decisão das companhias de pagar dividendos acima do mínimo obrigatório; (ii) empresas com Ações Preferenciais na composição de seu capital social tendem a distribuir menos dividendos; iii) o grau de independência do Conselho de Administração não exerce influência sobre a vontade de pagar das empresas; iv) o fato de o principal executivo ser também o presidente do Conselho de Administração das empresas não exerce influência na vontade de pagar das empresas; v) empresas com mais oportunidades de investimento tendem a distribuir menos dividendos; e (vi) as empresas tendem a manter sua política de dividendos estável. Esta pesquisa contribui com a literatura de dividendos na medida em que traz evidências sobre o papel de mecanismos específicos de governança corporativa na política de dividendos das companhias. Sugere-se que a discussão do tema seja ampliada de forma a testar outros mecanismos de governança corporativa que possam influenciar na decisão de pagar dividendos. / Under an Agency Theory framework, using empirical evidence, this research seeks to understand the influence of corporate governance in determining the dividend policy of companies listed on the BM&FBovespa. The influence is investigated in connection with companies’ will to pay dividends at levels above the minimum level of payment required by Brazilian corporate law. In order to achieve this goal, a panel data regression analysis with a random effects estimation model was fitted on a sample of 759 data points from years 2010 to 2013. Our findings suggest that: i) the governance segment in which companies are listed does not affect the decision to pay dividends above the minimum level; ii) companies with Preferred Shares tend to pay a lower amount of dividends; iii) the Board of Directors’ degree of independence does not influence the payment of dividends above the mandatory minimum; iv) the fact that the CEO is also the Chairman of the Board of Directors of the company has no influence on the decision to pay above the mandatory minimum ; v) companies with more investment opportunities tend to pay less dividends; and (vi) companies tend to adopt a constant dividend payout ratio. This research contributes to the payout policy literature as it provides evidence of the role of specific corporate governance mechanisms in the dividend payout policy of companies. Further research is recommended regarding additional corporate governance mechanisms that could influence the decision to pay dividends.

This paper examines the effect of corporate governance quality on firms’ payout policy. We analyze a global sample of 3,904 firms (25,773 firm-year observations) over the period 2002-2016. I find that corporate governance quality is positively related to payout ratios, consistent with the perspective of the free cash flow hypothesis (Jensen, 1986) and the outcome dividend model (LLSV, 2000). Moreover, consistent with findings of Mitton (2004) the positive relationship between firm’s corporate governance and dividend payout mainly holds for countries with strong shareholder or creditor protection, suggesting that firm-level corporate governance and country-level protection rights are complements rather than substitutes. This study also shows that firms with high corporate governance quality are less likely to disburse cash to their shareholders when controlling for country-level shareholder rights. Furthermore, this study contributes to the existing literature by investigating share repurchases and finds that well governed firms distribute less cash through share repurchases and total payout when they experience high growth opportunities. Moreover, the results suggest that countries that experience stronger shareholder and creditor rights reduce the positive impact that corporate governance quality has on share repurchases and total payout.

This research attempts to provide an explanation for the firm's choice of using either a dividend or a stock repurchase for distributing cash to its stockholders. It also provides an examination of the impact of the firm's disbursement decision on the stock market's resulting reassessment of the value of the firm. Before analyzing the disbursement decision, I examine the stock market effects of dividends and stock repurchases using an event study methodology that corrects for the possible variance change effects of cash distribution announcements. I find that the measured wealth effects are statistically significant and similar, for the most part, to that reported in earlier studies, notwithstanding increases in the variance of the abnormal returns distribution. I apply LIMDEP's full information maximum likelihood estimator (FIML) to investigate the factors influencing a firm's disbursement decision. I use proxies to represent the major theories put forward in the literature to explain firms' rationales for making cash disbursements, namely, signaling / asymmetric information, undervaluation hypothesis, agency theory, dividend clientele, corporate control, optimal capital structure theory, managerial incentives hypothesis, financial flexibility and cash flow permanence. I find that the firm's payout choice is related to the change in annual earnings per share, the residual volatility in daily stock returns prior to the distribution, the level of undervaluation, the free cash flows of the firm, the size of the firm, the extent of available managerial stock options, the average dividend yield, the volatility of operating earnings, the average daily stock return prior to announcement, the relative proportion of permanent cash flows, and the difference in the levels of permanent cash flows pre and post announcement. I evaluate the stock market impact of the disbursement choice by using a self-selectivity limited-dependent variables model. The findings indicate that while open market repurchasing firms make optimal disbursement choices, that is reflected in the reaction of the stock market to the disbursement announcement, firms using repurchase tender offers make disbursement decisions detrimental to the welfare of their stockholders. However, similar results were inconclusive with regard to firms choosing to utilize dividends as their cash payout mechanism.

<p>In May 2000 share repurchases were legalized in Sweden, with the purpose to provide companies with an efficient and flexible way to distribute capital. To buy back shares gives companies several benefits which are discussed in our study. The lack of academic research about this topic for Swedish companies gave us an incentive to provide knowledge specifically for this market. When companies announce a share repurchase program they are subject to uncertainty about the society’s reaction and economic consequences. Individuals within a well established organizational field deal rationally with uncertainty by adjusting to their institutional environment. The institutional environment can be defined as an abstract structure of regulations and behavioral norms that guide human’s decisions. This often leads to homogeneity in companies’ culture, structure and output. We ask the question if companies are realizing repurchase programs in a similar way over time, and if share repurchases have been developed as a more common used financial instrument since 2000. Our second question is if companies that decide to buy back shares pursue this under similar economic conditions as a result from becoming homogeneous.</p><p>The purpose of this study is to describe how institutional pressures in form of coercive, normative and mimetic isomorphism have affected companies’ decision to repurchase shares. We want to explain if there is an upward going trend of share repurchases, a standardized way to repurchase over time and if this decision can be determined by similarities in certain financial indicators of a company’s economic situation. To answer our purpose we used a quantitative research strategy with a deductive approach. The collected data was analyzed in a logistic regression analysis and by interpretations of descriptive statistics. We decided to examine for mimetic isomorphism public companies listed within the industrial sector on Stockholm Stock Exchange from the years 2000-2006. For the test of coercive and normative isomorphism with a logistic regression analysis we had to limit ourselves to investigate the years 2001-2003.</p><p>In reality the three institutional pressures are working simultaneously and should together lead to a common perception about share repurchases among companies. For our testing we separated institutional isomorphism based on our theoretical preconceptions. This allowed us to analyze each individual institutional pressure and how they interact together. We defined mimetic isomorphism as companies adjusting their repurchase behavior to other companies within the industrial sector. Our result has not shown any indications of such a behavior concerning time, amount or frequency of the buybacks. Testing if certain financial indicators such as excess cash, liquidity, solvency, dividends, volatile operative income, prior year return, growth opportunities, companies’ size, ownership concentration, institutional and individual shareholders could explain stock repurchase activity gave us the possibility to evaluate coercive and normative isomorphism. But the question how institutional isomorphism affects companies’ repurchase decisions still remains unanswered. We have not found any certain financial indicator which motivates companies’ decision to buy back their own shares. The decision might therefore be carried out under very different economic conditions and with different objectives. In the industrial sector and generally in the whole Swedish market only a relatively low proportion of companies buy back shares. The stated findings for the Swedish market imply a need for further investigations over a longer time horizon and for a larger population. Further investigations in this topic which has the potential to provide recent insight into the stock repurchase decision for Swedish companies would enhance and verify our statements.</p>