Dividends and Dividend Policy / Edition 1

Dividends and Dividend Policy / Edition 1

by H. Kent Baker, Robert W. Kolb
     
 

The intricacies of dividends and dividend policy can leave even the most seasoned financial professional feeling a little uneasy. While conventional wisdom suggests that paying dividends affects both shareholder wealth and the firm's ability to retain earnings to exploit growth opportunities, much debate still surrounds this dynamic discipline—especially when

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Overview

The intricacies of dividends and dividend policy can leave even the most seasoned financial professional feeling a little uneasy. While conventional wisdom suggests that paying dividends affects both shareholder wealth and the firm's ability to retain earnings to exploit growth opportunities, much debate still surrounds this dynamic discipline—especially when it comes to how dividend decisions can lead to value maximization.

That's why Dividends and Dividend Policy, part of the new Robert W. Kolb Series in Finance, has been created. Designed for those who want to gain a firm understanding of the fundamental concepts related to dividends and dividend policy, this reliable resource—with Professor H. Kent Baker as its editor—comprises contributions from both well-regarded academics and financial experts who are familiar with the various aspects of this field.

Divided into six comprehensive parts, this timely guide opens with an extensive overview of the history, trends, and determinants of dividends and dividend policy. Here, essential issues, such as the phenomenon of disappearing and reappearing dividends and how dividends are associated with several firm characteristics, are discussed in detail, and valuable insights are shared on the dividend policies of foreign firms as well as other legal and regulatory regimes.

After this informative introduction, Dividends and Dividend Policy shifts its focus to one of the most important questions in this arena: How do corporate decisions on distribution policy affect shareholder wealth? Using evidence from various methods including survey research, the authors describe managers' views on dividends and how they make dividend policy decisions. Along the way, they also examine how researchers have attempted to model dividend behavior mathematically and relate dividend policy to share prices.

While this book concentrates mainly on dividends and share repurchases—because these are the principal mechanisms by which corporations distribute cash to shareholders—many other dividend-related topics are also covered including special dividends, dividend reinvestment plans, stock splits and stock dividends, corporate governance, and dividend policies abroad.

Despite decades of research, we still don't have all the answers to the dividend puzzle. But with the information and theories outlined throughout these pages—from the determining factors of a payout policy to agency, signaling, life-cycle, and catering theories of dividends—this book will help put one of the most intriguing areas of corporate finance in perspective.

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Product Details

ISBN-13:
9780470455807
Publisher:
Wiley
Publication date:
05/04/2009
Series:
Robert W. Kolb Series, #1
Edition description:
New Edition
Pages:
552
Sales rank:
964,265
Product dimensions:
7.40(w) x 10.00(h) x 1.80(d)

Table of Contents

Acknowledgments.

PART I Dividends and Dividend Policy: History, Trends, andDeterminants.

1. Dividends and Dividend Policy: An Overview.

Introduction.

Dividends and Dividend Policy: History, Trends, andDeterminants.

Cash Dividends: Theoretical and Empirical Evidence.

Share Repurchases.

Other Distribution Methods.

Survey Evidence on Dividends and Dividend Policy.

Other Dividend Issues.

Conclusions.

References.

About the Author.

2. The Historical Evolution of Dividends.

Introduction.

A Historical Overview.

Corporations, Returns, and Dividends before 1800.

Dividends in the Nineteenth Century.

Dividends in the Twentieth and Twenty-First Centuries.

Conclusions.

References.

About the Author.

3. Trends in Dividends: Payers and Payouts.

Introduction.

Disappearing Dividends.

Reappearing Dividends. 

Conclusions.

References.

About the Authors.

4. Factors Influencing Dividends.

Introduction.

Firm Characteristics.

Market Characteristics.

Substitute Forms of Payout.

Conclusions.

References.

About the Authors.

5. Cross-Country Determinants of Payout Policy: EuropeanFirms.

Introduction.

Dividend Policies of European Firms.

Fraction of Dividends - Paying Firms. 

European Dividend Policy: Survey of Managers.

Conclusions.

References.

About the Authors.

PART II Cash Dividends: Theoretical and EmpiricalEvidence.

6. Dividend Irrelevance Theory.

Introduction.

Theories before Irrelevance.

MM’s Dividend Irrelevance.

The Impact of Market Imperfections.

Recent Challenges to Irrelevance.

Conclusions.

References.

About the Authors.

7. Residual Dividend Policy.

Introduction.

Conceptual Basis.

Macro Analysis of Dividend Behavior.

Inferences from Accounting Data and Market Reactions.

Survey Evidence.

Conclusions.

References.

About the Author.

8. Taxes and Clientele Effects.

Introduction.

Dividend Policy in a World without Taxes.

Dividend Policy in a World with Taxes.

Dividend Clienteles.

Tax Rate Changes and Dividend Policy. 

Dividend Taxation and Corporate Governance.

Conclusions.

References.

About the Authors.

9. Agency Costs and the Free Cash Flow Hypothesis.

Introduction.

Free Cash Flow Theory.

Empirical Tests of Free Cash Flow Hypotheses.

Conclusions.

References.

About the Author.

10. Asymmetric Information and Signaling Theory.

Introduction.

Signaling Models.

Empirical Evidence.

Future Directions of Research.

Conclusions.

References.

About the Author.

11. Behavioral Explanations of Dividends.

Introduction.

Theoretical Framework.

Empirical Evidence.

Conclusions.

References.

About the Author.

12. The Firm Life Cycle Theory of Dividends.

Introduction.

The Life Cycle Theory of the Firm.

Dividends in the Firm's Life Cycle.

Empirical Evidence.

Conclusions.

References.

About the Authors.

13. The Catering Theory of Dividends.

Introduction.

Baker and Wurgler's Catering Theory of Dividends.

Extensions to the Catering Theory of Dividends.

The Role of Catering in Explaining Other Dividend Theories.

Evidence from Empirical Studies.

Beyond Catering for Investors' Sentiments.

Why Do Investors' Preferences for Dividends Change overTime?

Conclusions.

References.

About the Authors.

PART III Share Repurchases.

14. Stock Repurchases: Theory and Evidence, Part 1.

Introduction.

Share Repurchase Methods.

Potential Motives for Share Repurchases.

Signaling and Undervaluation.

Conclusions.

References.

About the Authors.

15. Stock Repurchases: Theory and Evidence, Part 2.

Introduction.

Motives for Share Repurchase.

Empirical Results.

Cash Dividends versus Stock Repurchases.

Conclusions.

References.

About the Authors.

16. Stock Repurchases and Dividends: Trade-Offs andTrends.

Introduction.

Repurchases and Dividends: The Historical Record.

Measuring Repurchases.

Methods for Repurchasing Shares.

Repurchases versus Dividends: Trade-Offs and Trends.

Theoretical Models of the Repurchase Decision.

Repurchases and Valuation.

Conclusions.

References.

About the Author.

17. Beating the Market with Share Buybacks.

Introduction.

Anomalous Price Behavior around Repurchase Tender Offers.

Market Underreaction after Open-Market BuybackAnnouncements.

Private Repurchases and Long-Term Returns.

Beating the Market with Buybacks: From Theory to Practice.

Conclusions.

References.

About the Author.

PART IV Other DistributionMethods.

18. Special Dividends.

Introduction.

Historical Payment Patterns of Special Dividends.

The Information Content of Special Dividends.

Special Dividends and Share Repurchases. 

Conclusions.

References.

About the Authors.

19. Stock Splits, Stock Dividends, and Reverse StockSplits.

Introduction.

Stock Splits.

Stock Dividends.

Reverse Stock Splits.

Implications for Investors.

Implications for Managers.

Conclusions.

References.

About the Author.

20. Dividend Reinvestment Plans.

Introduction.

Characteristics of DRIPs and Direct Stock Purchase Plans.

Strengths and Weaknesses of DRIPs: The Investor’sPerspective.

Motivations of Companies for Offering DRIPs.

Theories and Empirical Evidence on DRIPs.

Implications of DRIPs.

Future Research in DRIPs.

Conclusions.

References.

About the Author.

PART V Survey Evidence on Dividends and DividendPolicy.

21. Cash Dividends and Stock Repurchases.

Introduction.

Survey Research on Dividend Policy.

Survey Research on Share Repurchases.

Comprehensive Payout Survey Research.

Conclusions.

References.

About the Author.

22. Stock Splits, Stock Dividends, and Dividend ReinvestmentPlans.

Introduction.

Overview of Dividend Policy and Firm Value.

Stock Splits.

Stock Dividends.

Dividend Reinvestment Plans.

Conclusions.

References.

About the Author.

23. Why Individual and Professional Investors WantDividends.

Introduction.

Why Individual Investors Want Dividends.

Dutch and Greek Surveys.

Why Professional Investors Want Dividends.

Conclusions.

References.

About the Authors.

PART VI Other Dividend Issues.

24. Why Firms Begin Paying Dividends: Value, Growth, and LifeCycle Effects.

Introduction.

What Is Known about Dividends?

Sample Selection and Empirical Methodology.

Empirical Results.

Conclusions.

References.

About the Authors.

25. Dividend Policy and Corporate Governance.

Introduction.

Agency Theory and Relevance to Dividend Policy.

Shareholder Rights and Legal Environment.

Executive Compensation.

Managerial and Outside Blockholder Ownership.

Board Structure.

Conclusions.

References.

About the Authors.

25. Dividend Policy and Corporate Governance.

Introduction.

Agency Theory and Relevance to Dividend Policy.

Shareholder Rights and Legal Environment.

Executive Compensation.

Managerial and Outside Blockholder Ownership.

Broad Structure.

Conclusions.

References.

About the Authors.

26. Dividend Policy in Regulated Industries.

Introduction.

Literature Review.

Future Research.

Conclusions.

References.

About the Author.

27. Dividend Policy in a Global Perspective.

Introduction.

How Dividends Link to Corporate Control and Ownership.

Dividends, Politics, and Law.

Conclusions.

References.

About the Authors.

28. Dividend Policy in Emerging Markets.

Introduction.

Institutional Factors Influencing Corporate Payout Policies inEFMs.

Cross-Country Studies.

Individual Country Studies.

A Simple Empirical Analysis.

Conclusions.

References.

About the Authors.

Index.

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