Dividend Policy, Agency Costs, and Earned Equity

Why do firms pay dividends? If they didn't their asset and capital structures would eventually become untenable as the earnings of successful firms outstrip their investment opportunities. Had they not paid dividends, the 25 largest long-standing 2002 dividend payers would have cash holdings of $1.8 trillion (51$160 billion (6% of assets), and $1.2 trillion in excess of their collective$600 billion in long-term debt. Their dividend payments prevented significant agency problems since the retention of earnings would have given managers command over an additional $1.6 trillion without access to better investment opportunities and with no additional monitoring. This logic suggests that firms with relatively high amounts of earned equity (retained earnings) are especially likely to pay dividends. Consistent with this view, the fraction of publicly traded industrial firms that pays dividends is high when the ratio of earned equity to total equity (total assets) is high, and falls with declines in this ratio, becoming near zero when a firm has little or no earned equity. We observe a highly significant relation between the decision to pay dividends and the ratio of earned equity to total equity or total assets,controlling for firm size, profitability, growth, leverage, cash balances, and dividend history. In our regressions, earned equity has an economically more important impact than does profitability or growth. Our evidence is consistent with the hypothesis that firms pay dividends to mitigate agency problems.

Fundamentals, Market Timing, and Seasoned Equity Offerings

Firms conduct SEOs to resolve a near-term liquidity squeeze, and not primarily to exploit market timing opportunities. Without the SEO proceeds, 62.6% of issuers would have insufficient cash to implement their chosen operating and non-SEO financing decisions the year after the SEO. Although the SEO decision is positively related to a firm's market-to-book (M/B) ratio and prior excess stock return and negatively related to its future excess return, these relations are economically immaterial. For example, a 150% swing in future net of market stock returns (from a 75% gain to a 75% loss over three years) increases by only 1% the probability of an SEO in the immediately prior year. Strikingly, most firms with quintessential "market timer" characteristics fail to issue stock and a non-trivial number of mature firms do issue stock, with current and former dividend payers raising more than half of all issue proceeds.

How Stable Are Corporate Capital Structures?

Leverage cross-sections more than a few years apart differ markedly, with similarities evaporating as the time between them lengthens. Many firms have high and low leverage at different times, but few keep debt-to-assets ratios consistently above 0.500. Capital structure stability is the exception, not the rule, occurs primarily at low leverage, and is virtually always temporary, with many firms abandoning low leverage during the post-war boom. Industry-median leverage varies widely over time. Target-leverage models that place little or no weight on maintaining a particular ratio do a good job replicating the substantial instability of the actual leverage cross-section

Accounting choice in troubled companies

This paper studies accounting choice in 76 NYSE firms with persistent losses and dividend reductions (40% forced by binding covenants). We find that managers' accounting choices primarily reflect their firms' financial difficulties, rather than attempts to inflate income. Firms with and without binding covenants exhibit minor accrual differences in the ten years before the dividend reduction. In the dividend reduction and following three years, the full sample exhibits large negative accruals that likely reflect the fact that 87% of sample firms engage in contractual renegotiations -with lenders, unions, government, and/or management-that provide incentives to reduce earnings.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/31888/1/0000840.pd

Pevonedistat (MLN4924), a First‐in‐Class NEDD8‐activating enzyme inhibitor, in patients with acute myeloid leukaemia and myelodysplastic syndromes: a phase 1 study

Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/111220/1/bjh13323.pd

Gender Differences in Russian Colour Naming

In the present study we explored Russian colour naming in a web-based psycholinguistic experiment (http://www.colournaming.com). Colour singletons representing the Munsell Color Solid (N=600 in total) were presented on a computer monitor and named using an unconstrained colour-naming method. Respondents were Russian speakers (N=713). For gender-split equal-size samples (NF=333, NM=333) we estimated and compared (i) location of centroids of 12 Russian basic colour terms (BCTs); (ii) the number of words in colour descriptors; (iii) occurrences of BCTs most frequent non-BCTs. We found a close correspondence between females’ and males’ BCT centroids. Among individual BCTs, the highest inter-gender agreement was for seryj ‘grey’ and goluboj ‘light blue’, while the lowest was for sinij ‘dark blue’ and krasnyj ‘red’. Females revealed a significantly richer repertory of distinct colour descriptors, with great variety of monolexemic non-BCTs and “fancy” colour names; in comparison, males offered relatively more BCTs or their compounds. Along with these measures, we gauged denotata of most frequent CTs, reflected by linguistic segmentation of colour space, by employing a synthetic observer trained by gender-specific responses. This psycholinguistic representation revealed females’ more refined linguistic segmentation, compared to males, with higher linguistic density predominantly along the redgreen axis of colour space

Why High Leverage is Optimal for Banks

Abstract Liquidity production is a central role of banks. High leverage is optimal for banks in a capital structure model in which there is a market premium for (socially valuable) liquid financial claims and no deviations fro

Special considerations in the management of adult patients with acute leukaemias and myeloid neoplasms in the COVID-19 era: recommendations from a panel of international experts

This article is made available for unrestricted research re-use and secondary analysis in any form or by any means with acknowledgement of the original source. These permissions are granted for the duration of the World Health Organization (WHO) declaration of COVID-19 as a global pandemic.The ongoing COVID-19 pandemic caused by severe acute respiratory syndrome coronavirus 2 is a global public health crisis. Multiple observations indicate poorer post-infection outcomes for patients with cancer than for the general population. Herein, we highlight the challenges in caring for patients with acute leukaemias and myeloid neoplasms amid the COVID-19 pandemic. We summarise key changes related to service allocation, clinical and supportive care, clinical trial participation, and ethical considerations regarding the use of lifesaving measures for these patients. We recognise that these recommendations might be more applicable to high-income countries and might not be generalisable because of regional differences in health-care infrastructure, individual circumstances, and a complex and highly fluid health-care environment. Despite these limitations, we aim to provide a general framework for the care of patients with acute leukaemias and myeloid neoplasms during the COVID-19 pandemic on the basis of recommendations from international experts