Are dividends disappearing? mixed evidence from Europe

Recent empirical studies reported the phenomenon of low propensity of firms to dividend payment, concluding that companies have become less likely to pay dividends. In addition, most of these studies claim that investors’ expectations regarding dividend payments also decreased. We analyse the propensity to pay dividends in three European markets: Portugal, France and the UK. Although they are all European markets, they differ from each other for several reasons. Firstly, the UK is one of the largest European capital markets, whereas the French and Portuguese markets are smaller, especially Portugal. Additionally, these latter two markets are less intensively researched. Secondly, these countries differ in terms of ownership concentration. In Portugal and France ownership tends to be more concentrated than in the UK. Thirdly, Portugal and France are bank-based financing systems, whereas the UK is a market-based system. Finally, the legal rules covering protection of corporate shareholders are different in the three countries. We find evidence of the decline of firms paying dividends in Portugal and in the UK, but not in France. Moreover, we find some evidence that firms that pay dividends tend to be the ones of larger size and higher profitability, but we find no evidence of a significant relation between a firm’s growth and dividend payments

Liquidity and Dividend Policy

We document the association between a firm's payout policy and its stock's liquidity. In particular, we show that dividend-paying firms have a more liquid market for their stock and measures of a stock's liquidity is positively linked to its probability of being a dividend payer. Furthermore, this link between dividends and liquidity is stronger when shareholders are more powerful. This is consistent with a mechanism in which payout decisions act as a commitment not to invest: by distributing cash, the firm reduces its potential for internal equity financing, raising its cost of capital and leading to less investment. Such a mechanism may lead to less volatile stock prices and potentially to a decrease in the adverse selection costs faced by liquidity-constrained shareholders, increasing stock price liquidity. When shareholders have more power, liquidity would be more strongly linked with dividends as managers would be more likely to pay dividends to meet shareholders�preference for liquidity.Liquidity; Dividend Payers; Adverse Selection Costs; Corporate Governance; Shareholder Power; Informed Trading

Firm Level Factors Affecting Liquidity – The Swedish Stock Market

Purpose: The purpose of this study is to further look at which firm-adjustable factors affect the liquidity of a firm's stock in the Swedish stock market. We also want to determine which out of these suggested factors have a significant effect on liquidity across different proxies of liquidity. Finally we aim to determine whether our findings are consistent with previous research findings. Methodology: A quantitative approach with the interpretation of the results from panel data regressions. Theoretical framework: Liquidity Capital Asset Pricing Model (LCAPM) Empirical foundation: A sample of 433 firms during the time period 2000-2014 Conclusions: We come to the conclusion that the firm’s assets liquidity and the ownership structure, more specifically the cash and cash equivalents and the free floating shares, have a positive relationship with liquidity for firms on the Swedish Stock market. These findings are consistent with other studies in other markets. Our data did however not provide significant results to establish a relationship between liquidity and capital structure or dividend payout policies

A Case Study of Investor R&D Evaluation using Game Theory

This paper aims to identify an optimal investment strategy in cases of high-intensity R&D private micro entities. A game theory matrix is constructed using publicly available empirical data extracted from the financial statements of an R&D-intensive private micro-entity. The game theory matrix attempts to estimate the effect of the discretionary managerial choice to capitalise or expense the development cost of internally generated intangible assets; investors\u27 risk appetite could be affected by the capitalisation signalling. The investment strategies are classified based on their risk into three categories. High risk is represented by equity. Medium risk is represented by long-term debt, and low risk is represented by short-term debt. The game theory matrix results indicate that in similar situations, the dominant strategy is the medium-risk approach through long-term debt. This strategy must be confirmed by solving more game theory matrices based on similar R&D-intensive firms. However, it is an easily constructed advisory indicator for retail investors considering investing in unaudited small private entities. They could use it to identify an optimal investment strategy when uncertain of the genuine intangible asset prospects signaled via development cost capitalization

Loan availability and investment: Can innovative companies better cope with loan denials?

This study examines the consequences of loan denials for the investment performance of small and medium-sized German enterprises. As a consequence of a loan denial, innovative companies experience a smaller drop in the share of actual to planned investment than non-innovative companies. The non-randomness of loan denials is controlled for with a selection equation employing the intensity of banking competition at the district level as an exclusion restriction. We can explain the better performance of innovative companies by their ability to increase the use of external equity financing, such as venture capital or mezzanine capital, when facing a loan denial. --Investment,loan availability,innovation,private equity

Inflation, the corporate greed narrative, and the value of corporate social responsibility

Inflation can significantly undermine companies’ relationships with their customers, employees, and other stakeholders, spawning a crisis of trust. This is particularly true in a period when many citizens accuse corporations of excessively raising prices to maximize profits. Studying the cross-sectional reactions of U.S. stocks to inflation over the period 2018-2022, we find that in the month following a higher inflation rate, equity investors reward firms with stronger social capital, as proxied by their corporate social responsibility (CSR) levels. The effect holds using different measures of inflation, including region-specific ones. The inflation-hedging property of CSR is stronger for firms headquartered in Democratic U.S. states (those most exposed to the “corporate greed” narrative of inflation) and appears to operate through the firm’s cash flows. Analyst forecast revisions provide additional evidence of the value of CSR in inflationary periods. Overall, the findings spotlight inflation as a crisis in stakeholder trust and provide new insights into the importance of social capital for firm value