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Purpose – This paper investigates whether the identity of the controlling shareholder is a determinant to the distribution of earnings (IOE vis-à-vis regular dividends) in a sample of Brazilian public companies. Theoretical framework – Through numerical exemplifications, we show that the cost of receiving cash payouts through Interest on Equity (IOE) is significantly heterogeneous across shareholders. We use this diversity to state the optimal distribution (from the tax standpoint) for each type of shareholder. Design/methodology/approach – We test the hypotheses using an unbalanced panel of 404 Brazilian firms over a 12-year period. Our estimations use Probit and Tobit panel data regressions. Due to endogeneity concerns on the ownership identity status, we also run regressions using lagged regressors, Heckman two-step selection model, and matched samples. Findings – Consistent with ex-ante, tax-driven hypotheses, we find that the presence of institutional investors significantly increases cash payouts in the form of IOE vis-à-vis cash dividends, reducing overall taxation (firm-level plus investor level) for the average firm. Smarter tax management through dividend policy is also a positive function of firm-characteristics such as size and better corporate governance standards. Overall, our evidence suggests shareholders’ identity influences payout policy through the taxation channel. Research Practical & Social implications – Although the literature discusses several possible explanations for the limited use of IOE payments in Brazil, we provide evidence that many firms may not enjoy the tax benefits of IOE precisely because the tax law discourages controlling shareholders from using it. Such evidence is critical also for policymakers since there is a current, controversial national debate on imposing a dividend distribution tax and extinguishing IOE (Projeto de Lei nº 2.337, 2021), “segunda fase da Reforma Tributária”. Originality/value – Unlike previous studies, we discuss the distribution of IOE from the perspective of the beneficiaries (shareholders) and payers (investees) rather than the latter or the former alone. Furthermoe, as a reflection of potential measurement problems, we create a variable that measures the ratio of IOE distributed and the maximum allowed by law (IOE_IOE*), which permits a more precise measurement of the size of the tax benefit obtained by each firm. Keywords – Shareholder Identity, Payout Policy, Tax Management, Corporate Governance, Interest on Equity.

This study examines capital allocation efficiency in the business group when parent firms experience adverse shocks of financial conditions. We exploit a quasi-experiment in China, the mandatory dividend of a state-owned business group in 2007, to conduct difference-in-differences estimation, and find that: (1) When parent central state-owned enterprises are mandatorily required to pay dividend to the governments (parent CSOEs), their group-affiliated listed central state-owned enterprises (listed CSOEs) substantially improve investment efficiency. (2) A plausible mechanism is that adverse cash shocks of parent CSOEs could facilitate the resource reallocation through related party transactions within a business group motivated by the listed CSOEs’ investment opportunity instead of the parent CSOEs’ tunneling behavior. (3) Our findings are more pronounced for firms with better external and internal governance. Overall, we provide the empirical evaluation of the economic consequences of mandatory dividend policy in terms of a firm’s investment efficiency within a state-owned business group.

[Shareholder invested in the company with the goal of enhancing wealth through a better dividend. Therefore, company performance is a priority among shareholder for decision making either to remaining investment or withdrawal. Better performance is linked to better financial management through which all liabilities are able to pay. It is very important for companies to go through financial ratio analysis to predict financial distress in order to avoid the company's bankruptcy. Early action may be taken if the financial ratio analysis indicates the company is facing a financial crisis. This prevents any crisis between company and shareholder. A company that is able to determine the company's capacity to meet the obligation using a liquidity ratio. Moreover, the leverage ratio measures the efficiency of companies in utilizing their resources to generate sales. The performance was monitored to align the objectives of the company and the shareholders in a similar way, so the profitability ratio is very useful as indicated

This paper proposes a latent-variables approach to recover biases in beliefs directly from asset prices. We focus on return extrapolation, a bias in expectations formation that has received considerable attention in recent asset pricing research. We estimate a present-value model of the price-dividend ratio of the market that embeds extrapolative beliefs alongside rational discount rates and expected dividend growth. This approach allows us to measure extrapolation bias without having to rely on survey data, and inherently guarantees that the researcher focuses on a set of beliefs that matter for price formation. We use our 70-year long time-series of extrapolative beliefs to test the key prediction of behavioral models of the stock market with return extrapolators, namely, a rise in extrapolation bias today leads to predictably lower market returns in the future. Through both in-sample and out-of-sample analysis, our results provide support for behavioral theories of asset prices in the presence of extrapolators.

The dividend (Gordon) growth model (DGM) is a simple stock valuation equation in four variables: (1) price; (2) next-period cash flow; (3) a perpetual and constant rate of growth in the periodic cash flow; and (4) a perpetually-constant discount rate. The DGM can be expressed to equate the perpetually-constant discount rate to the cash flow yield on the current price plus the perpetual growth rate in the periodic cash flow. But that expression would provide a reliable estimate of a real-world discount rate only if both the cash flow yield and the growth rate used as inputs to the model were perpetually constant. In rate-regulation proceedings, however, utility expert witnesses use the DGM with current (not perpetual) dividend yields and analysts' 3-5 year (not perpetual) earnings growth rates. This practice contributes to approved equity cost of capital awards above plausible cost of capital estimates, shifting wealth from rate payers to utilities.

The calculation of the intrinsic value of shares is essential for investors. The result can be used as a guideline for buying, selling, or holding shares. This research was conducted because the stock price on the Indonesia Stock Exchange (IDX) in March 2020 experienced a deep decline, namely a decrease of 38% on average, so it is interesting to study. In determining the intrinsic value of these shares, the Dividend Discount Model (DDM) and Price Earning Ratio (P/E Ratio) methods will be used as well as evaluate the most accurate method. The study uses stock data from all business sectors on the IDX for the 2014-2019 period, especially companies that pay dividends. The sample used in this study were 49 companies (22%) of the average 222 companies that distributed dividend. Based on the results of the study, DDM, and P/E Ratio there are 43 companies (86%) in undervalued positions or only seven overvalued companies (10%). MOS is greater than 30% with DDM and P/E Ratio of 26 companies (52%). Likewise, with the results of the accuracy-test using the Mean Absolute Pricing Error (MAPE), it turns out that DDM is only 0.14% greater than the P/E Ratio. It can be said that DDM is relatively more accurate than the P/E Ratio. Thus overall the calculation of the intrinsic value of shares using DDM and the P/E Ratio in terms of undervalued or overvalued, MOS and accuracy can be concluded that there is no significant difference.

The Equity risk-premium and volatility puzzle - is it possible to have a high equity premium and a low risk-free rate with a plausible risk aversion- have received a great deal of attention but beyond this question, the fundamental issues of that puzzle are the followings: what are the economic representations that can provide such results? What are the relevant links between finance and economics? And what should be the consequences for economic decisions makers? The classic ways to model the financial economy with a representative agent placed in a Lucas tree model, i.e. maximizing consumption-based utility, where fruit is equivalent to dividend and consumption, failed to explain a high equity premium and a low risk free rate. Even more, simple changes in reasoning failed to provide a consistent macroeconomic and finance representation that sticks to reality. This paper presents a new eco-financial approach based on three major changes: the definition of Wealth and wealth increment and their utility for any agent instead of consumption, a permanent change of equilibrium theory, a more realistic model in which the agents fear much more crises than ordinary fluctuations. This model borrows two key principles from the model developed in Modigliani and Miller’s seminal papers: firstly an economy with investment opportunities in the market of goods and services and secondly an economy where rational agents always prefer more wealth to less and are indifferent as to whether a given increment to their wealth takes the form of dividend or growth in value .Main changes come from, we generalized this wealth approach to any agent, in a changing of equilibrium world, where crises are much more dreaded than ordinary negative events. We will show that it is a way to solve the equity premium and to make consistent: macro, micro, finance and reality.

The purpose of the paper is to examine financing payout behavior of Indian firms. Specifically, the reliance of Indian firms on capital markets to finance their discretionary payouts (DCP) is explored using data of S&P BSE 500 firms for the sample period from 2010 to 2020. This study reports several new findings for the payout policies followed by Indian firms. First, dividend payouts are not disappearing in India because dividend payout ratio and share repurchase ratio for Indian firms are found to increase during the sample period. Second, rupee magnitude of dividend payments and percentage of firms paying dividends are also increasing. Third, the financing of DCP shows that firms finance DCP mostly with debt and occasionally with equity. Fourth, firm characteristics namely size, excess leverage, excess cash, market-to-book ratio, R&D (only for debt financing), managerial ownership, cash flows, and credit rating influence financing of DCP with debt and equity issuance. Lastly, business cycle conditions are shown to influence debt financed DCP. Overall, the findings run counter to existing studies which state that dividends are disappearing because this study finds evidence of increasing dividends among Indian firms and provides insights to practitioners and academicians on the financing of payout policy in India.

Share prices fluctuate far more than dividends. In contemporary lit- erature, this excess volatility is usually discussed involving the Camp- bell-Shiller present value identity. In our view, it is more appropriate to model future dividends and prices explicitly as random variables. We refer to excess volatility if the coefficient of dispersion for share prices is higher than for dividends. It is often presumed that excess volatility could be properly expli- cated by time-varying discount factors. However, we will show that this idea is logically inconsistent as long as one uses deterministic dis- count factors. This even holds if one assumes more complex stochastic structures of the dividends, such as AR(2) processes. We therefore propose stochastic discount factors and show that our model is free of arbitrage, the transversality condition is met and prices are unique. Finally, we try to consolidate our approach with the Lucas Model. Here, it is shown on the one hand that in this model the cost of capital cannot be stochastic. Moreover, the equity premium puzzle can no longer be replicated, but rather a realistic value for risk aversion is obtained. Finally, we change the Lucas model such that stochastic capital costs are also possible.

We develop a dynamic model of banks whose insiders have superior information about the impact of a pending shock to the bank’s cash holdings and can signal the bank’s type through its dividend policy. Banks that will be adversely affected by the shock have incentives to pool with unaffected banks to increase their market value. To avoid being mimicked, the unaffected banks can credibly signal via a more aggressive payout strategy. Dividend payout restrictions have the potential to prevent a separating equilibrium from forming. This leads to the bad type adopting a more aggressive payout policy with a higher risk of default but mitigates the distortion of the good type's policy. We identify a number of scenarios where this trade-off presents an opportunity for regulatory intervention and some where it does not.

The capital played important role during the early development of company law during the industrial evolution. The capital includes share capital which is received when a company issues shares to shareholders as well as the loan capital which the company obtains from issuing debentures to creditors. Capital of a company means cash or goods used to generate income either by investing in a business or a different income property. In other words the money, property and other valuables which collectively represent the wealth of an individual or business are called capital of a company. By shares, we mean units of ownership interest in a corporation or financial asset. Owning shares in a business does not mean that the shareholder has direct control over the business's day-to-day operations. However, being a shareholder does entitle the possessor to an equal distribution in any profits, if any are declared in the form of dividends. Debenture means a type of debt instrument that is not secured by physical asset or security.

After the tumult of the Whitlam government, the Fraser government (1975-1983) saw consolidation with less reform. The 1975 Asprey report remained largely unactioned, despite the fundamental problems that burdened the Australian tax system. The 1983 election of the Hawke government, however, set in train a series of economic reforms, and tax would play a big part in these. This paper tracks those developments, starting with the tax avoidance and evasion issues that plagued the era and the 1981 Campbell Committee financial system review. The main focus, though, is on the 1985 draft white paper and tax summit that delivered the first instalment of the Asprey blueprint. While the broad-based consumption tax didn’t get up, the package reformed Australia’s income tax system, with a capital gains tax, a fringe benefits tax, a foreign tax credit system and a dividend imputation system.

We present a novel approach to analyzing stock return predictability that accommodates (i) arbitrary predictor persistence, (ii) panels with common factors, (iii) multiple predictors, (iv) short- and long-horizon analysis, and relies on standard inference from least-squares estimation of a suitably adjusted predictive regression. We analyze US and international equity premia and find that dividend- and earnings-related price ratios have negligible predictive power over long horizons, whereas the dividend yield has considerable predictive power over short horizons, with positive coefficients, consistent with present value theory. Long-term government bond yields exhibit predictive power over all horizons from one month through five years.

Purpose- This study investigates the impact of Corporate Social Responsibility (CSR) on stock prices of Indian listed companies. The literature reviews show a strong contradictory of the relationship between CSR and stock prices which is still debatable. This study will tell whether there is a positive or negative or no correlation between CSR and stock price in Indian context. Methodology- The research design used in this study was an experimental cross-sectional design. This study uses regression, correlation and hypothesis testing to find the relationship between corporate social responsibility and stock price and financial performance. The stock price and some financial measures like dividend, ROE and employee benefit are also taken to measure the financial performance which indirectly affects stock price and to measure CSR the CSR expenditure is taken. Findings- This study will tell whether there is a positive or negative or no correlation between CSR and stock price in Indian context. This study is also used to suggest if the company are able to get enough returns from their CSR spending. Originality/value- The primary contribution of this study is to present a valid and robust evidence of the relationship between CSR and stock price of India listed companies. The proper reason behind CSR spending’s and its impact.

The outbreak of the Covid-19 pandemic massively increased uncertainty about firms’ cash flows and their access to financial markets. We examine its effect on firms’ strategies for preserving cash by suspending dividends and buybacks and raising new funds through bond and equity issues. We identify key firm and stock characteristics that help explain a large portion of the cross-sectional variation in firms’ payout and financing decisions and show that the expansive monetary policies pursued by the Federal Reserve in the early phase of the pandemic crucially affected the timing and sequencing of these decisions.

Using data from Korea, we show that the second-tier exchange—also known as the entrepreneurial market—assigns higher valuations to growth-oriented (i.e., small yet intangibles-rich) companies despite their low profitability. In contrast, the main board favors companies with stable cashflows and regular payouts to shareholders. The difference between the two exchanges is most pronounced when companies are conditioned on their stage in life cycle as proxied by dividend payments. That is, the “growth” valuation is most evident in earlier-stage companies (i.e., dividend non-payers) of the second-tier exchange while the “cashflow” valuation is strongest in later-stage companies (i.e., dividend payers) of the main board. Further analysis supports the notion that the second-tier exchange distinguishes itself from—and thus complements—the main board by helping keep corporate growth opportunities in stock prices. Conversely, the results indicate that the main board fails to capitalize corporate growth options into firm value, as most companies therein have stable cashflows from unique assets and market position (i.e., economic rents) as the main value driver.

This paper aims at empirically analyzing Huawei’s employee shareholding scheme behind its rapid growth to make it the leading Chinese communication manufacturer, with a particular focus on its governance aspect, which the literature has not revealed in depth. With a research question as “Who owns Huawei?”, it sheds light on the background and mechanism of the firm’s employee shareholding scheme and its role in the firm’s governance, drawing on publicly available sources including corporate databases, the preceding literature, information provided by Huawei upon request whenever necessary. As a result, the following points are revealed: (1) Huawei Technologies is wholly owned by its holding company named Huawei Investment & Holding, which implements an employee shareholding scheme through its trade union and it is owned approximately 99 % of the share by employees. (2) As stipulated by the regulations, the firm concentrates all employees’ share to its trade union. Under the restriction from issuing regular stock to its employees, the shares held by the employees are designed as phantom stocks, which come with shareholder rights, including dividends, voting and property rights, as articulated in the Company Law of the People’s Republic of China. (3) Employees’ stocks are legally registered in the name of The Huawei Investment & Holding Co., Ltd. Trade Union Committee, but are effectively owned by employees and controlled separately from the assets of the trade union. (4) Huawei's highest decision-making body is the Employee Shareholders' Representative Commission, which represents the employee shareholders and exercises their rights through the elected Representatives. The employee shareholders vote one vote per share and Representatives vote one vote per person. Although Ren Zhengfei, as the founder, has a veto, its exercise is limited to the extent specified by internal regulations. (5) Based upon the above findings, this paper concludes that Huawei is owned and controlled by its employees, despite the fact their stocks are registered in the name of the firm’s trade union, which is not only made public, but also internally disseminated and practiced. This paper, as the first research in English to the best knowledge of the author, the firm is employee-owned and controlled. It contributes to understand its Scheme in the context of the Chinese legal system, and discover the reality concealed under the constraints due to the Chinese legal system and discuss in real terms, as one of the first comprehensive investigation of Huawei’s Scheme from the governance perspective. Further contributions are anticipated through the comparative studies, adopting a similar program, with other Chinese firms adopting a similar program, and concentrating employee shares to their trade union committees. The author presumes this paper serves as the first step toward series of global comparative studies to enrich our findings not only about the similarities and differences among the countries with different economic and legal systems, but also about the principles of the relevant program suited to the firms with global operations. The rest of the paper is composed of introduction, literature review, discussion, and implications before arriving at the Conclusions. The discussion covers the legal background, employees’ ownership and trade union’s involvement, governance structure, and related subjects.

We define a sentiment indicator that exploits two contrasting views of return predictability, and study its properties. The indicator, which is based on option prices, valuation ratios and interest rates, was unusually high during the late 1990s, reflecting dividend growth expectations that in our view were unreasonably optimistic. We interpret it as helping to reveal irrational beliefs about fundamentals. We show that our measure is a leading indicator of detrended volume, and of various other measures associated with financial fragility. We also make two methodological contributions. First, we derive a new valuation-ratio decomposition that is related to the Campbell and Shiller (1988) loglinearization, but which resembles the traditional Gordon growth model more closely and has certain other advantages for our purposes. Second, we introduce a volatility index that provides a lower bound on the market's expected log return.

This paper empirically examines the Capital Purchase program (CPP) under TARP that was usedby the U.S. government to bail out distressed banks with equity infusions. We hypothesize that a feature of the CPP, namely the ability of the government to appoint directors on the assisted bank’s board in case it missed six quarterly dividend payments, was a governance intrusion that banks would wish to avoid. Therefore, it would address both (i) the ex ante moral hazard that banks would take actions that increased the likelihood of a future government bailout as well as (ii) the ex post moral hazard that banks would undertake actions after receiving bailout funding that would increase the government’s risk exposure. We find evidence consistent with this hypothesis: in the empirical distribution of missed payments there is a sharp discontinuity at five and the probability of a sixth missed payment after missing five payments is sharply lower than the other transition probabilities. The appointment of government directors improves the bank’s profitability and reduces its risk. As a special case, the firing of Citicorp’s CEO in the third quarter of 2012 after the appointment of new directors on its board, pursuant to government participation in its common equity, induced a sharp exodus of assisted banks from the CPP.

Using a large sample of firms from 45 countries, we find that firms in countries with high climate risk reduce their cash dividends but increasingly use share repurchases to make payouts, suggesting that firms substitute dividends with repurchases to increase their payout flexibility in response to heightened climate risk. These results are robust after controlling for firm performance, cash holdings and various other firm and country characteristics. The effect of climate risk on payout policies is more pronounced for firms that are more vulnerable to climate risk and for those in countries where people pay more attention to climate change and the national culture emphasizes uncertainty avoidance and long-term orientation.

Analyzing a sample of Chinese firms splitting their stocks via stock dividends and using proprietary trading data to measure investors’ gambling preference, we find that stock splits raise the stocks’ lottery characteristics, making them attractive to gambling investors, who willingly pay higher prices for skewed securities. Split firms also become more risk-taking. Furthermore, their cost of equity declines, largely due to increased gambling investors’ pricing influence. Our findings suggest that firms with weak lottery characteristics and those with inefficient risk sharing, can use stock splits to attract gambling investors to improve risk sharing and to lower their cost of equity.

The present research study examined the impact of different dividend rate announcements on stocks prices in the Indian stock market. Stocks selected from S&P BSE 500 index and study period from 2008 – 2017. The sample used for this study is 1755 pure cash dividend announcements (492 large-caps, 425 mid-caps, and 838 small-caps). Dividend rates are classified into six classifications to test the stocks' abnormal returns to different dividend classifications. Event methodology market model used to calculate Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR). The results were observed twenty-one times based on market capitalization and dividend rate wise for a final dividend announcement. The results of the study are not the same for different dividend rate classifications and different market capitalizations. The study found positive abnormal returns on event day in most of the classifications, and it is similar to Litzenberger and Ramaswamy (1982), Asquith and Mullins Jr (1983), Grinblatt, Masulis and Titman (1984), Chen, Nieh, Da Chen, and Tang (2009) and many previous research results studied in major developed stock markets and emerging stock markets. Full sample and small-cap final dividend rate 100 percent to 199 percent average abnormal returns are positively significant, and other final dividend rate classification abnormal returns are positive in most of the observations, but returns are not significant. Large-cap average abnormal returns are more sensitive to different dividend rates, and small-cap reacts positively in all classifications. So, different market capitalization final dividend actions impact on stocks in India varies in different dividend rate classifications.

Crowdfunding is an alternative funding mechanism whereby innovators can access funding for their projects using a variety of “payback” options to investors – from traditional rewards such as equity, dividends and repayments with interest to non-monetary rewards such as physical or digital rewards. It has been defined by Schwienbacher and Larralde (2010) as an open call to the crowd to generate financial resources for particular purposes. The reward-based model is of great interest as it gives the option of providing incentives to investors without using money (which is in short supply) or giving up equity – yet still being able to provide rewards which are of great interest to investors such as prototypes of games, a character in a game, early versions of products, or products at an exclusive discount (Islam and Phillips, 2020).

A common corporate cash management strategy is to delay payments owed to suppliers. We examine whether buyers pay suppliers faster in response to a recent regulatory change in the United Kingdom that mandates the public disclosure of buyers’ payment practices. We find that after the regulatory change, UK firms subject to this regulation shortened their payment periods relative to several control samples of firms that were not subject to the regulation. In cross-sectional tests, we predict and find that this shortening of the payment period is attenuated for firms that are less able to bear the costs of paying suppliers faster. Specifically, we find that the reduction in the payment period is smaller for buyers that (i) have longer operating cycles, (ii) depend more heavily on trade credit as a source of external financing, and (iii) pay dividends. In supplemental tests using proprietary data, we find that buyers subject to this regulation reduced their trade credit that is overdue by 30 days or more. However, this reduction is partially offset by an increase in the trade credit that is overdue by less than 30 days. Our findings are important in light of the ongoing debate in other regimes (e.g., the United States) on whether to require additional disclosures of trade credit.

We test whether and how commercial bank lending responded to a large dividend tax cut in 2003. While the Jobs Growth and Tax Relief Reconciliation Act (JGTRRA) was billed as a supply-side stimulus, studies of this legislation have failed to detect any increases in capital spending at nonfinancial firms. In contrast, we find strong increases in loan supply following the tax cut at publicly traded banks, though not at privately held banks. Dividend payouts increased at both sets of banks. Our results provide at least some support for all three branches of dividend tax theory.

This article identifies national culture as an important factor affecting corporate cash holdings by using China and its national culture, Confucianism, as a setting. We find that firms located in regions with higher levels of Confucian culture hold higher levels of cash and this high cash holdings status is also more persistent. Next, we employ an instrumental variable to establish causal identification of the culture effect and the IV estimates show a compelling economic magnitude. The culture effect is stronger for more financially-constrained and riskier firms, suggesting precautionary motives as the underlying mechanism. Besides, we find that the culture effect remains intact after controlling for corporate governance heterogeneity, which rules out the agency motives. Further, we find that higher Confucian culture firms make better investment decisions, have higher acquisition announcement returns, pay out more dividends and achieve higher profitability and lower profit volatility. These all are additional evidence arguing against agency motives, but supporting an efficient outcome argument. Finally, we also show that the CEO/board chairman’s Confucian background and the firm’s headquarter cultural environment together exert an influence.

This study documents that individual investors increase buy-initiated trades prior to ex-dividend days and increase sell-initiated trades after the ex-day. Institutions supply liquidity to individual investors by increasing their use of sell limit orders in the cum-dividend period and increasing their usage of buy limit orders in the ex-dividend period. Stocks that experience higher net purchases from individual investors operating through discount brokers in the cum-dividend period have lower ex-day returns in the order of 25 basis points. This difference is as large as 44 basis points for high yield securities. This contrasts with the average excess ex-day return of 24 basis points. The results indicate that individual investors play an influential role in ex-dividend pricing.

We examine how firms’ labor skill heterogeneity affects dividend policy. Since it is more costly to hire, retain, and layoff skilled labor than unskilled labor, we hypothesize that firms relying more on skilled labor are more cautious in setting their dividend policy, which competes with funding for labor force. We find that firms with more skilled labor are less likely to distribute or increase dividends, and when they do so, the magnitudes are smaller. We further document that dividend increases by such firms are more strongly correlated with future earnings increases and are accompanied by stronger stock market reactions.

This article provides information on the law and procedures relating to share capital and capital maintenance. Discussions also cover issues concerning capital reduction, redemption of own shares, dividend distribution and limitation on provision of financial assistance to purchase shares in the company, as provided in the Companies Act 2016. It is worth noting the abolishment of the concept of authorized share capital and par value in Malaysia; and the legal and accounting implication that arise from this measure. The writing of this article employs the hermeneutics analysis of relevant legislation(s). It provides a quick and simplified reference for students and non-practitioner.

We decompose earnings yield into a smoothing component and a stationary residual component to isolate the fluctuations due to variation in expected returns from those due to the change in the forecast of dividend dynamics. The residual component forms a powerful predictor of dividend growth motivated by linking the dividend partial adjustment model to the present-value framework. Empirically, the proposed predictor displays statistically significant in-sample and out-of-sample predictive power for aggregate dividend growth at monthly and annual frequencies, robust in dividend reinvestment strategies, in pre- and post-war data, in good and bad times, and at short and long horizons.

The bargaining process between the platform and users has great impact on the pricing scheme and the successful establishment of a platform. When users receive utilities after paying a initial cost to join the platform, they face the risk of platform's aggressive pricing and are discouraged from joining the platform. The problem of incredible commitment leads to the launch failure of potential platforms and great welfare loss in equilibrium, which is named "platform holdup'' by us. An effective and practical solution is that government supervises on platform's misbehaviour to provide implicit guarantee. For platforms, spontaneously providing subsidies to new users or dividends to joined users are also efficacious solutions. Competition can partly solve the problem, but may be inefficient and only effective under certain circumstances.

That international arbitration lacks diversity should come as no surprise. In the U.S., modern arbitration owes part of its popularity to the backlash against President Jimmy Carter’s diversification of the federal judiciary. Arbitration may have served as a refuge for those wishing to avoid having their dispute decided by an African American or a woman. With arbitration, parties could avoid the ongoing diversity efforts in both federal and state courts. While there are more African American and female arbitrator candidates than there were forty years ago, diversity efforts are still met with resistance, especially with speed and diversity pitted as competing goals. Through his work on fast-track international commercial arbitration, however, Professor Benjamin G. Davis demonstrated that diversity supports speed: the two are complementary. The creation and replicability of fast-track international commercial arbitration is an example of a dividend that was made possible by a moment of diversity, inclusion, and equality at the International Chamber of Commerce (“ICC”). It is also a story that invites one to consider what international dispute resolution might be like if, in 1991, the ICC had had policies or practices that excluded people on the basis of race. Likewise, it invites one to consider what international alternative dispute resolution might look like now, if racial inclusion efforts had begun for more institutions, more intensely, years prior. The fast-track international arbitration story serves as a reminder that diversity has paid dividends in international commercial arbitration and can do so in the future.

An inquiry into the innate nature of a tax presupposes examination of an intricate web of variables, which on most occasions results into raging debates. For examples, whether a tax on service provider is a tax on service or a professional tax, whether a tax on capital value of assets is same as wealth tax, whether a tax on tobacco is luxury tax, nature of expenditure tax, etc. are some intriguing controversies into the true nature of various taxes which have received exposition of the Supreme Court. In such cases, the complexities often issues when the characteristics of the tax legislation depart from the ordinarily understood dimensions of a particular tax. The immediate case at hand is of ‘tax on distributed dividend’, or Dividend Distribution Tax (‘DDT’), as it is popularly called which is imposed under a separate Chapter of the Income Tax Act, 1961 (‘ITA’). This tax was introduced in 2000, omitted and reintroduced after a brief hiatus. DDT has since then been in vogue upto March 2020 when its levy was discontinued. Its contours have been examined twice by the Supreme Court, yet the debate on its true nature continues. The exact issue for consideration is whether DDT is a tax on income of the shareholder, which has resulted into extensive debates, particularly in the context of international tax. The inquiry arises from the challenges by taxpayers to the official view of the Government that DDT is not a tax on the income of the shareholder. According to the shareholders, particularly those who are Non-Residents and entitled to invoke Double Taxation Avoidance Agreements (DTAA), DDT is nothing but a tax on income of shareholder and therefore the levy of DDT should also observe the limitations under the DTAA on any tax on dividend in India. The debate is ongoing and has received mixed response. Currently, the issue awaits consideration of the Income Tax Appellate Tribunal. This article seeks to demystify the cause of controversy and the run-up to the present status.

How do politicians benefit from a policy? Politicians create and maintain policies even when beneficiaries do not reciprocate electorally, but existing research rarely explores alternative feedback channels. In this paper, we assess both direct and indirect political dividends of public policies by examining Minha Casa, Minha Vida (MCMV), a programmatic housing policy in Brazil. We surveyed 2,119 MCMV lottery participants and found that winners do not hold incumbents or the benefactor party in higher regard than non-winners. But MCMV is not politically barren. Non-beneficiaries, who lack direct experience with the program but are a much larger group than beneficiaries, are aware of the program and evaluate it very well. Based on a triple difference design, we find that MCMV contractor firms and their owners donate to political campaigns significantly more than would otherwise be expected. This shows that politicians reap political returns indirectly both through “audience” and “insider” channels.

Negative interest rates are a new phenomenon. Short-term deposit rates of the European Central Banks became negative in 2014 and sovereign debts of highly solvent countries followed. This paper measures the effect of short-term rates on short-term financial variables and of long-term rates on structural variables of listed euro firms. I thereby test if negative rates have an additional effect. I find that liquidity ratios and creditors ratios significantly decline if short-term rates fall, while negative ECB rates reduce liquidity ratios by an additional 0.6 percentage points. Declining long-term German government bond yields increase non-liquid assets significantly, and negative yields per se increase these assets in addition by 4.5%. The latter positive effects arise from the southern-euro countries and Finland and France. For the first full COVID-19 year (2020), the investments in non-liquid assets were 7.6% smaller. This will have contributed to the fact that -despite the corona crisis- the liquidity ratios increased by 2.3 percentage points. Similar COVID-19 effects are also found for small and large firms, for different sectors, and in most of the euro countries.

Consistent with recent findings that investors perceive performance by price changes, cross-sectional return extrapolation comes entirely from capital gains. Stocks that do not pay dividends (capital-gain stocks) experience robust return extrapolation, while dividend-paying stocks do not. Using a stock’s dividend-paying status to proxy for exposure to return extrapolation, I test cross-sectional predictions of return extrapolation models. Consistent with return extrapolation models, momentum and long-term reversal are stronger among capital-gain stocks. The value premium, however, is similar for both groups, suggesting that while return extrapolation may help generate momentum and long-term reversal, its role is limited for the value premium.

This paper investigates the effects of the issuance of retail products with non-linear payoffs on option prices. For a given underlying asset, when the outstanding volume of products embedding a short-put position increases, implied volatility at the corresponding strike decreases. A similar pattern exists for the dividend term structure: larger outstanding volumes of retail structured products are associated with a flattened dividend term structured. A simple trading strategy exploiting this pattern leads to a Sharpe ratio above 2. These results are consistent with the existence of segmented markets and speak to the equilibrium effects of the retail demand for innovative securities.

In the presence of strong minority shareholder protection mechanisms, shareholders may become placid and even inattentive with regards to their firms’ nonoperating activities in the hope that those mechanisms serve to assure agents’ incentive compatibility. Relying on a cross-country panel database, the paper evidences that a stronger minority shareholder protection at the country level is associated with larger firm-level long-term nonoperating investments, higher share of nonoperating investment incomes in the firms’ bottom line, and relatively larger acquisitions. At the company level, the implementation of stronger minority shareholder protection mechanisms, like internal policies favoring shareholder engagement and equality of voting rights, is documented to result in higher reliance on nonoperating incomes, larger acquisitions, higher cash reserves and lower dividend payouts. At the same time, the atomization of shareholder base appears to reduce the effectiveness of nonoperating activities as the firms with a larger shareholder base tend to hold more long-term investments while concomitantly recording lower investment incomes. In contrast, higher shareholder diversification is shown to be associated with lower cash holdings and higher dividend payouts. Overall, while being attentive to cash management and dividend policies, minority shareholders seem to be excessively forbearing with regards to the use of the bulk of nonoperating assets.

Recent global initiatives to reduce carbon emissions have increasingly exposed the carbon-emitting firms to regulatory and technological shocks. Given these shocks, we examine whether carbon emissions affect corporate cash holdings and find that carbon-emitting firms, on average, carry less cash. This finding is robust to alternate measures of our main variables, different model specifications, and various methods to address endogeneity, including a difference-in-differences approach. In the cross-section, we find that the documented negative relationship between carbon emissions and cash holdings magnifies with weaker internal governance, CEO overconfidence, and higher internal social capital. Further analyses reveal that carbon-emitting firms prefer spending more on capital investment but less on dividends and R&D activities. Finally, we document that carbon-emitting firms with excess cash holding have a lower firm valuation and a higher cost of capital, indicating that the capital market rewards them for holding less cash. Overall, consistent with agency theory, our results indicate that managerial preference for suboptimal investment or avoidance of external disciplining might attribute lower cash holding for carbon-emitting firms.

In the early stage of COVID-19 spread, China's stocks market was greatly affected, while other stocks markets also fell to a certain extent. In order to explore the mechanism of this phenomenon in addition to global economic integration, we establish a two market asset pricing model based on heterogeneous beliefs and exogenous dividends. The results show that as long as investors believe that there is a correlation between the prices of the two markets, even if one impact only affects noise traders in a single market, the prices of the other market will still be impacted. Interestingly, we find that a single market dividend shock does not affect another market. After that, in order to verify the existence and influence of this mechanism, this paper uses DCC-MGARCH to make a quantitative analysis of the impact of the epidemic on the stocks market of China and the United States. The increase of the number of domestic daily infection will significantly lead to the decline of the securities market of China, and the increase of the number of domestic cumulative infection will significantly lead to the decline of the stocks market of the United States. The stock markets of China and the United States have an impact on each other. The impact of homogeneity and heterogeneity on the stock market of China and the United States shows that the impact on the stock market of the United States is not only due to the integration of the world economy, but also due to the influence of investors' beliefs.

This policy brief highlights flaws in the current federal tax treatment of stock buybacks and proposes to address those flaws by equalizing the tax treatment of buybacks and dividends. (We explore the proposal in greater detail in Hemel & Polsky, Taxing Buybacks, 38 Yale J. on Reg. 246 (2021), https://ssrn.com/abstract=3764112.) Stock buybacks allow foreign shareholders to avoid U.S. withholding tax on corporate cash distributions. Stock buybacks also allow U.S. taxable investors to reduce or eliminate shareholder-level tax on corporate cash distributions through a combination of deferral, loss harvesting, and stepped-up basis at death. Our proposal—based on an idea first suggested by Marvin Chirelstein a half century ago—would plug these gaps in the tax base by treating stock buybacks as imputed dividends. We explain the mechanics of the proposal and the principal design choices facing policymakers. We also estimate—conservatively—that the proposal would raise more than $500 billion over the 10-year budget window.

Recent findings on the term structure of equity and bond yields pose serious challenges to existing equilibrium asset pricing models. This paper presents a new equilibrium model of subjective expectations to explain the joint historical dynamics of equity and bond yields (and their yield spreads). Equity/bond yields movements are mainly driven by subjective dividend/GDP growth expectations. Yields on short-term dividend claims are more volatile because short-term dividend growth expectation mean-reverts to its less volatile long-run counterpart. Procyclical slope of equity yields is due to the counter-cyclical slope of dividend growth expectations. The correlation between equity returns/yields and nominal bond returns/yields switched from positive to negative after the late 1990s, mainly owing to a stronger correlation between real GDP growth and real dividend growth expectations, and only partially due to procyclical inflation. Dividend strip returns are predictable and the strength of predictability decreases with maturity due to predictable dividend forecast errors and revisions. The model is also consistent with the data in generating persistent and volatile price-dividend ratios, and excess return volatility.

Given the background of COVID-19, this paper studies the impact of the ESG Risk score, Environment Risk Score, Social Risk Score and Governance Risk Score on the Hold Period Return (HPR) of S&P 500 Stocks in 2020. The linear regression model is adopted to conduct the research in the SAS 4.6. Other than ESG factor, I also included other 14 independent variables that selected from nine categories derived by Yahoo Finance, which are Valuation Measures, Profitability, Management Effectiveness, Income Statement, Balance Sheet, Cash Flow Statement, Stock Price History, Share Statistics and Dividends & Splits. The model shows ESG Risk score factor does not have an impact on the HPR at 5 percent significant level of the S&P 500 stocks. And this finding also applies to 11 different sectors. However, I found that HPR in some sectors are sensitive to a certain risk factor among Environment Risk, Social Risk and Governance Risk.

In this paper, we assess the economic benefits of demographic changes in India by employing econometric models and robustness checks based on panel data gathered over a period of more than three decades. Our analysis highlights four key points. First, the contribution of India’s demographic dividend is estimated to be around 1.9 percentage points out of 12% average annual growth rate in per capita income during 1981–2015. Second, India’s demographic window of opportunity began in 2005, significantly improved after 2011, and will continue till 2061. Third, our empirical analysis supports the argument that the realisation of the demographic dividend is conditional on a conducive policy environment with enabling aspects such as quality education, good healthcare, decent employment opportunities, good infrastructure, and gender empowerment. Fourth, the working-age population in India contributes around one-fourth of the inequality in per capita income across states. Thus, to reap the maximum dividends from the available demographic window of opportunity, India needs to work towards enhancing the quality of education and healthcare in addition to providing good infrastructure, gender empowerment, and decent employment opportunities for the growing working-age population.

This paper provides an overview of rules for taxation and dividend distributions for EU and UK listed entities in EU regulated markets. Empirical research on IFRS application typically considers IFRS as informative about future cash flows. However, taxes and distributable dividends are based on national rules different from IFRS in all EU countries prior to Brexit. To analyze these differences, researchers need to know about 1) how taxable and distributable income are determined in different EU countries mandating IFRS for most listed firms; 2) the differences between IFRS and the national rules on taxable and distributable income. Regarding Question 1), we analyze and classify the EU countries’ regulations about tax and income distributions and whether and how the are legally linked to IFRS. To address Question 2), we develop an ordinal measure of the de jure differences between IFRS income and taxable income on the one hand and IFRS income and distributable income on the other. Our study contributes to empirical research on the informativeness of IFRS by providing measures of book-tax and book-dividend conformity within the EU and the UK. By comparing the national rules to IFRS, we enhance the understanding of the relevance of IFRS reporting.

Why are stock prices much more volatile than the underlying dividends? The excess volatility of prices can in principle be attributed to two different causes: time-varying discount rates for expected future dividends, arising from variation in risk premia; or the irrational exuberance of investors, bidding prices up and down even in the absence of changes in the underlying value of the asset. No consensus has so far emerged among economists as to the prevalence of one or the other source of price variation. I propose in this paper a novel way to approach this problem, by identifying changes in the uncertainty faced by investors regarding the fundamental value of an asset and exploiting the different response in prices that such changes in uncertainty would generate through sentiments or risk premia. I then apply this framework to the S&P 500 index from 1872 till 2019: the positive correlation found between uncertainty and prices (or, equivalently, the negative correlation between uncertainty and implied risk premia) is not compatible with rational investors' behavior and suggests instead the presence of a significant sentiments component in stock prices.

Firms added to the S&P 500 index join a prestigious and exclusive club. They want to fit in the club, which creates a “keeping up with the Joneses” effect. Firms pay more attention to their index peers after inclusion and their investment, external financing, and payouts comove more with their index peers. These effects do not appear to result from the increased coordination among investors posited by the common ownership literature as inclusion does not cause a decrease in competition. Since index inclusion does not increase shareholder wealth permanently, these peer effects do not appear to benefit shareholders.

Exploiting a government-initiated deleveraging program, we investigate how marginal corporate tax rate affects corporate policy changes in response to a credit shock. We find that, after the initiation of China’s 2015 deleveraging program, high-tax-rate firms reduce leverage to a less extent compared with low-tax-rate firms. This effect is stronger in non-state-owned firms and firms with less non-debt tax shields. High-tax-rate firms reduce dividend and switch to equity financing to a less extent. Through retaining more debt, high-tax-rate firms cut less investments in fixed assets, R&D and human capital. With this unique deleveraging setting, we reveal important implications of the tax-leverage link for corporate policies.

On December 15, 1976, a just-promulgated corporate law introduced, among other innovations, a minimum required dividend distribution on annual basis in Brazil. As a conceptual reference, this article refers to the so-called residual theory of dividend policy. According to this theory, dividends are determined from what is left after optimal investment and financing decisions are made by the firm. The introduction of a minimum required dividend represented the imposition of a constraint on that behavior by the firms. The hypothesis that this constraint affected the firms’ investment behavior is tested herein, and this is confirmed with the use of an interaction term with dividend payments. A “difference-in-differences” approach is adopted, with data for 233 publicly owned firms in the 1973-1980 period.

We investigate asset returns around banking crises in 44 advanced and emerging economies from 1960 to 2018. In contrast to the view that buying assets during banking crises is a profitable long-run strategy, we find returns of equity and other asset classes generally underperform after banking crises. While prices are depressed during crises and partially recover after acute stress ends, consistent with theories of fire sales and intermediary-based asset pricing, we argue that investors do not fully anticipate the consequences of debt overhang, which result in lower long-run dividends. Our results on bank stock underperformance suggest that government-funded bank recapitalizations can often lead to substantial taxpayer losses.