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.

Developing University Infrastructure to Foster Equity and Inclusion in College Classrooms

In our increasingly diverse society, it is imperative to understand how higher education can serve as an engine for equity and success for all students. This proposal seeks to build the infrastructure to change university culture in ways that foster equity and inclusion in college, both at Pitt and nationally. To do so, we propose the formation of an interdisciplinary, multi-campus team of researchers and practitioners that is based at the University of Pittsburgh and draws on expertise from two other, large public research universities, Indiana University (IU) and the University of Minnesota (UM). Our teaming grant proposal seeks immediate funding to 1) support a GSR for 12 months to support data analytics, lead focus groups, and help manage the collaborative, 2) travel funds to foster collaboration with our partners at IU and UM, and 3) participant payments for focus groups and course instructors to establish proof-of-concept for the proposed CAFE Scholars Progra

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

SYK Regulates mTOR Signaling in AML

Spleen Tyrosine Kinase (SYK) was recently identified as a new target in acute myeloid leukemia (AML); however, its mechanistic role in this disease is poorly understood. Based on the known interaction between SYK and mTOR signaling in lymphoma, we hypothesized that SYK may regulate mTOR signaling in AML. Both small-molecule inhibition of SYK and SYK-directed shRNA suppressed mTOR and its downstream signaling effectors, as well as its upstream activator, AKT. Moreover, the inhibition of multiple nodes of the PI3K signaling pathway enhanced the effects of SYK suppression on AML cell viability and differentiation. Evaluation of the collateral MAPK pathway revealed a heterogeneous response to SYK inhibition in AML with down-regulation of MEK and ERK phosphorylation in some AML cell lines but a paradoxical increase in MEK/ERK phosphorylation in RAS-mutated AML. These studies reveal SYK as a regulator of mTOR and MAPK signaling in AML and demonstrate that inhibition of PI3K pathway activity enhances the effects of SYK inhibition on AML cell viability and differentiation

Financial Characteristics of Companies Audited by Large Audit Firms

Purpose “ The purpose of this paper is to examine how financial characteristics associated with the choice of a big audit firm with further investigation on the agency costs of free cash flows.Design/methodology/approach “ The sample used for this work includes industrial listed companies from Germany and France. To test our hypothesis, we used a number of logit models, extending the standard model selection audit firm, to include the variables of interest. Following previous work, our dependent dummy variable is Big4 or non-Big4.Findings “ We observed that most independent variables in the German companies show similar results to previous work, but we did not have the same results for the French industry. Moreover, our findings suggest that the total debt and dividends can be an important reason for determining the choice of a large audit firm, reducing agency costs of free cash flows.Research limitations/implications “ This study has some limitations on the measurements of the cost of the audit fees and also generates opportunities for additional searching.Originality/value “ The paper provides only one aspect to explain the relationship between the problems of agency costs of free cash flow and influence in choosing a large auditing firm, which stems from investors\u27 demand for higher quality audits

In Support of a Patient-Driven Initiative and Petition to Lower the High Price of Cancer Drugs

Comment in Lowering the High Cost of Cancer Drugs--III. [Mayo Clin Proc. 2016] Lowering the High Cost of Cancer Drugs--I. [Mayo Clin Proc. 2016] Lowering the High Cost of Cancer Drugs--IV. [Mayo Clin Proc. 2016] In Reply--Lowering the High Cost of Cancer Drugs. [Mayo Clin Proc. 2016] US oncologists call for government regulation to curb drug price rises. [BMJ. 2015

Proxy contests and the governance of publicly held corporations

Analysis of 60 proxy contests for seats on the boards of exchange-listed firms during 1978-1985 shows that three years after the contest less than one-fifth of the sample firms remain independent, publicly held corporations run by the same management team. Proxy contests are typically followed by managerial resignations, even when dissidents fail to obtain a majority of board seats, and are often followed by sale or liquidation of the firm. The average stockholder wealth gains associated with proxy contests are largely attributable to gains by companies in which dissident activity leads to sale or liquidation.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/27893/1/0000312.pd

Managerial ownership of voting rights: A study of public corporation with dual classes of common stock

Managers of firms with dual classes of common stock can choose different quantities of votes for a given cash flow interest by choosing different quantities of the two securities. We study managerial stock holdings in 45 dual class firms and find that vote ownership per se is an important motivation for these holdings in that corporate officers and their families hold a median 56.9% of the votes and 24.0% of the common stock cash flows. We also find significant family involvement in many sample firms, and document four case studies in which explicit acquisition premiums were paid for superior votmg shares