Dividends and Dividend Policy / Edition 1

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Overview

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

That's why Dividends and Dividend Policy, part of the new RobertW. Kolb Series in Finance, has been created. Designed for those whowant to gain a firm understanding of the fundamental conceptsrelated to dividends and dividend policy, this reliableresource—with Professor H. Kent Baker as itseditor—comprises contributions from both well-regardedacademics and financial experts who are familiar with the variousaspects of this field.

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

After this informative introduction, Dividends and DividendPolicy shifts its focus to one of the most important questions inthis arena: How do corporate decisions on distribution policyaffect shareholder wealth? Using evidence from various methodsincluding survey research, the authors describe managers' views ondividends and how they make dividend policy decisions. Along theway, they also examine how researchers have attempted to modeldividend behavior mathematically and relate dividend policy toshare prices.

While this book concentrates mainly on dividends and sharerepurchases—because these are the principal mechanisms bywhich corporations distribute cash to shareholders—many otherdividend-related topics are also covered including specialdividends, dividend reinvestment plans, stock splits and stockdividends, corporate governance, and dividend policies abroad.

Despite decades of research, we still don't have all the answersto the dividend puzzle. But with the information and theoriesoutlined throughout these pages—from the determining factorsof a payout policy to agency, signaling, life-cycle, and cateringtheories of dividends—this book will help put one of the mostintriguing areas of corporate finance in perspective.

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Product Details

  • ISBN-13: 9780470455807
  • Publisher: Wiley
  • Publication date: 5/4/2009
  • Series: Robert W. Kolb Series, #1
  • Edition description: New Edition
  • Edition number: 1
  • Pages: 552
  • Product dimensions: 7.40 (w) x 10.00 (h) x 1.80 (d)

Meet the Author

H. Kent Baker, PhD, CFA, CMA, is University Professor ofFinance at the Kogod School of Business at American University,Washington, D.C. Before joining the faculty at American Universityin 1975, he held both faculty and administrative positions atGeorgetown University and the University of Maryland. Baker haspublished extensively in leading academic and professional financejournals. He has consulting and training experience with more than100 organizations, and has been listed in fifteen biographies,including Who's Who in Finance and Industry, Who's Who in theEast, and Outstanding Educators of America.

Robert W. Kolb is the Frank W. Considine Chair of AppliedEthics and Professor of Finance at Loyola University, Chicago.Before this, he was the Assistant Dean, Business and Society, andDirector, Center for Business and Society, at the University ofColorado at Boulder, and department chairman at the University ofMiami. Kolb is also the author of over twenty books on finance,derivatives, and futures, and has authored numerous articles inleading finance journals.

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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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