How investor pressure leads to higher dividend payouts

The dividends in the UK companies have been on the rise, despite uncertain economic outlook due to COVID-19, pension deficits and irrespective of whether the companies have been making profits. This column analyses the reasons for such a dramatic increase in dividend payouts. We attribute it to pressure from investors in three fundamental ways: the threat of takeovers, shareholder value-oriented corporate governance practices measured by director independence and board equity incentives, and short-term trading and institutional ownership patterns

Russian governance and investment

Research on firm’s investment behaviour is central to corporate finance. Investment policy can be explained by many corporate finance theories involving the choice of financing (debt vs. equity vs. internal funds), agency costs (management vs. monitoring blockholders), asymmetric information (between management and providers of external finance) and moral hazard (the choice of level of risk of an investment project). Research on governance focuses on whether internal and external governance mechanisms improve firm value and profitability, and shareholder wealth. This focus on profits and returns continues to dominate the management literature, despite the widespread recognition that investment behaviour is at the basis of firm growth and productivity and contributes largely to shareholder value. Studying investment behaviour allows assessment of whether the controlling owners are re-investing their gains in long-term assets or taking them out as cash or dividends. These alternatives have drastically different implications for firm productivity growth and the dynamism of the economy. This thesis addresses this issue and investigates the question of how governance influences investment behaviour. I argue that investment depends not only on individual governance mechanisms but also on a combination of these mechanisms. In order to test and provide evidence supporting this argument, this thesis contains three essays that consider the effects on corporate investment behaviour of transparency and disclosure (TD), ownership networks, blockholders and board composition, and studies the effects of substitutability or complementarity between these governance mechanisms. The Russian context serves as an appropriate setting to examine these effects since governance plays a bigger role in this emerging economy than in a developed economy.Open Acces

State control and corporate governance in transition economies:25 years on from 1989

Research Question/Issue - Which forms of state control over corporations have emerged in countries that made a transition from centrally-planned to marked-based economies and what are their implications for corporate governance? We assess the literature on variation and evolution of state control in transition economies, focusing on corporate governance of state-controlled firms. We highlight emerging trends and identify future research avenues. Research Findings/Insights - Based on our analysis of more than 100 articles in leading management, finance, and economics journals since 1989, we demonstrate how research on state control evolved from a polarized approach of public–private equity ownership comparison to studying a variety of constellations of state capitalism. Theoretical/Academic Implications - We identify theoretical perspectives that help us better understand benefits and costs associated with various forms of state control over firms. We encourage future studies to examine how context-specific factors determine the effect of state control on corporate governance. Practitioner/Policy Implications - Investors and policymakers should consider under which conditions investing in state-affiliated firms generates superior returns

Share Repurchases and Board Independence

Share repurchases have come under criticism as they may be used for earnings management and take capital away from productive investment. However, share repurchases can also reduce the agency costs of free cash flow and offset the dilution of current shareholders. Whether firms engage in good or manipulative share repurchases can crucially hinge on the quality of corporate governance. Using UK firm panel data, we study the effect of independent directors on repurchase policies. Our results indicate that board independence increases the propensity to engage in share repurchases. Moreover, board independence attenuates the harmful effect of manipulative share repurchases on employment growth. Our approach exploits the passage of a corporate governance reform which provided a unique opportunity to tease out the causal impact of independent directors on share repurchases. Our findings advocate in favor of more active involvement of independent directors in payout policies

The return of state capitalism? How the Covid-19 pandemic put the liberal market economies to the test

As states across the world increase their interventions in the economy to deal with the fallout from the pandemic, we are likely to see an uptick in state ownership of assets (again). States can use various tools for proactive intervention in economic production and the functioning of markets, in addition to its regulatory and security roles. Mike Wright, Geoffrey Wood, Aldo Musacchio, Ilya Okhmatovskiy, Anna Grosman, and Jonathan Doh undertake an exploratory factor analysis with seven variables that represent various aspects of state intervention in economic activities for 59 countries. They find that not all state interventions should be threatening to business

Dividends Policy and Payouts: Evidence from South Africa

The theoretical framework that informs dividend studies is somewhat loose. This makes it difficult to test competing views on dividend behaviour. One view is that it reflects a useful discipline on managerial autonomy to invest; another view is that it represents a constraint on investment due to misinformed or short-term investors. As a first step in researching this issue, this paper estimates a dividend pay-out relationship for South Africa. Estimated results are obtained for separate panels of listed and unlisted non-financial firms. Among the notable results, we find that standard proxies for investment opportunity do not generally find significance. The effect of past profitability, firm size and age are in line with developed country results, but the tendency to smooth dividends seems weaker, particularly for unlisted firms. Leverage is generally negative for the listed sample in line with existing literature, but the sign is reversed for the unlisted sample. There is weak evidence that a major tax reform, effective after 2012, increased the smoothing, and possibly also the trend in the level, of dividends. Payout behaviour seems to differ considerably by industry, but ownership effects are only observable for larger firms

Dividend Policy and Investor Pressure

The economics of dividend policy has focused on the single tight narrative that dividends keep managers honest, mitigating concerns that they over-invest. This article provides a critique of that agency narrative, arguing that pressure from short-term focused investors, executives and board members pushes the firm into preemptive actions of returning too much cash via dividends. We analyze three channels of influence for investor pressure through 1) threat of takeovers, 2) shareholder value oriented corporate governance, measured by director independence and board equity incentives, and 3) trading and institutional ownership patterns. We find that firms adopt a higher dividend payout to discourage takeover bids. Also, FTSE 100 firms, that are most focused on shareholder value governance in the form of equity-based compensation and a higher share of independent directors, display a higher dividend payout. Frequency of trading and ownership by transient investors seeking current profits also predict increased dividend payout. Traditional agency theory, focused on dividends as a tool for managerial discipline, is not strongly supported by the results, which rather support a narrative of short-term investor pressure on firms irrespective of investment opportunities

Occupying wide open spaces? Late Pleistocene hunter–gatherer activities in the Eastern Levant

With a specific focus on eastern Jordan, the Epipalaeolithic Foragers in Azraq Project explores changing hunter-gatherer strategies, behaviours and adaptations to this vast area throughout the Late Pleistocene. In particular, we examine how lifeways here (may have) differed from surrounding areas and what circumstances drew human and animal populations to the region. Integrating multiple material cultural and environmental datasets, we explore some of the strategies of these eastern Jordanian groups that resulted in changes in settlement, subsistence and interaction and, in some areas, the occupation of substantial aggregation sites. Five years of excavation at the aggregation site of Kharaneh IV suggest some very intriguing technological and social on-site activities, as well as adaptations to a dynamic landscape unlike that of today. Here we discuss particular aspects of the Kharaneh IV material record within the context of ongoing palaeoenvironmental reconstructions and place these findings in the wider spatial and temporal narratives of the Azraq Basin

Book review: Covid, Brexit and the Anglosphere: Frameworks for Future Trade and Economic Growth

Book review: Richard Simmons and Nigel Culkin, Covid, Brexit and the Anglosphere: Frameworks for Future Trade and Economic Growth, Bingley: Emerald Publishing, 2022, 204 pp, ISBN (Print): 978-1-80382-690-5, ISBN (online): 978-1-80382-687-5, ISBN (ebook): 9781-80382-689-9. Reviewed by: Anna Grosman, Loughborough University London, UK.</p

Mitigating financing constraints on investment: Ownership and transparency in Russia

This study examines the impact of transparency and disclosure scores on fixed investment utilizing the unique context of the Russian capital market. I find that transparency has a positive and significant impact on fixed investment. However, state-owned enterprises are more sensitive than oligarch-owned enterprises to improved transparency. I find robust evidence that greater transparency of financially constrained firms positively affects investment. Transparency, therefore, is a valid mechanism for reducing financing constraints on investment