When the manufacturer opens an online channel to compete with its retailer, effective mechanisms need to be utilized to coordinate the O2O (online to offline) distributions and thus higher profits can be achieved for all supply chain players. We first propose two mechanisms, which are the manufacturer’s financial support in reward points to the retailer and the profit sharing, for the supply chain players to employ in order to mitigate the O2O competition and create a Pareto result. Our results show that the manufacturer’s financial support in reward points to the retailer mechanism does alleviate the O2O competition and help improve the profit of each supply chain player; however, the retailer is reluctant to cooperate with the manufacturer to implement a profit sharing. We then propose a novel mechanism, which is the combination of the manufacturer’s financial support in reward points to the retailer with the profit sharing, to coordinate the O2O distributions. Our results show that such a mechanism effectively solves the issue of O2O competition and creates much higher profits for supply chain players. Furthermore, our results also show that compared to the simultaneous mode, the leader-follower Stackelberg mode provides no competitive advantage to the manufacturer or the retailer when the combination of the manufacturer’s financial support in reward points to the retailer with the profit sharing is utilized to coordinate the O2O distributions.

Introduction

Nowadays many manufacturers, such as Hewlett & Packard, Lenovo, Dell Computer, Mattel, Pioneer Electronics, P&G, and Haier, are using O2O (online to offline) channels to sell their products to consumers (Tsay and Agarwal, 2004; Chen et al., 2008; Amrouche and Yan, 2012). While more and more manufacturers are distributing their products through O2O channels, their retailers are concerning the O2O competition. Collett (1999) points out that some manufacturers such as Levi Strauss & Co. have stopped selling directly to consumers. Some of Home Depot’s manufacturers (e.g. Stanley Works) have given up their online plan after receiving the warning letter from Home Depot (Brooker, 1999). Keenan (1999) gives examples where the manufacturers took steps to explain to the retailers that the opened online channel is targeted to a different market segment. Sometimes, manufacturers use the online channel for information and sales support only, while leaving the actual sales to the retailers (Cohen, 2000). Chiang et al. (2003) show that online channel is not always detrimental to the retailers. Prior research (e.g. Tsay and Agrawal, 2004; Cattani et al., 2006; Yue and Liu, 2006; Mukhopadhyay et al., 2008; Yan, 2011) also propose some other coordinative mechanisms (e.g. sales efforts, information sharing, added retail services, brand differentiation) to alleviate the O2O competition. In this paper, we first propose two mechanisms, which are the manufacturer’s financial support in reward points (i.e. the manufacturer provides a financial support to the retailer to implement a reward points program) to the retailer and the profit sharing, for supply chain players to employ in order to mitigate the O2O competition and create a Pareto result.

1- Introduction

2- Theory and hypothesis development

3- Research design

4- Results

5- Conclusion

References

Abstract

The objective of this paper is to evaluate whether dividend imputation, whereby tax credits may be passed on to shareholders for corporate tax paid, impacts corporate tax avoidance. This is undertaken with a pooled cross-sectional research design evaluating differences in tax avoidance across firms where there are significant differences in corporate tax avoidance incentives. Specifically, potential differences arise between firms paying dividends with tax credits, paying dividends without tax credits, and not paying dividends. Results suggest that firms paying dividends with tax credits attached are less likely to engage in tax avoidance with an average cash effective tax rate up to 16.9 percentage points higher than firms that pay dividends without tax credits, and up to 14.7 percentage points higher than firms that do not pay dividends at all. Accordingly, this provides insights into the effectiveness of dividend imputation in mitigating corporate tax avoidance, as well as providing support for the continuance of dividend imputation in Australia. Additionally, a positive association is found to exist between outside directors and corporate tax avoidance, extending to firms paying dividends with tax credits where dividend imputation is expected to mitigate such a relation. In combination, these results suggest heterogeneity of costs and benefits of tax avoidance and this is a challenge in evaluating corporate tax aggressiveness generally, and the impact of corporate governance on corporate tax avoidance in particular.

Introduction

The literature suggests that dividend imputation may be associated with lower levels of tax avoidance. However, there are numerous limitations in these studies. Amiran, Bauer and Frank (2016) rely on a cross country design, and both Wilkinson, Cahan and Jones (2001) and Ikin and Tran (2013) use limited samples which are unlikely to be representative of the overall population. Further, all three papers lack a theoretical foundation linking tax avoidance and dividend imputation, and provide no evidence of economic significance. Amiran et al. (2016) in particular, and with little justification, implicitly assume that under dividend imputation, managers in all firms will not engage in tax avoidance, as it is ineffective in increasing shareholders‘ wealth (Lasfer, 1996; Amiran et al., 2016). As a consequence, they ignore differences from the impact of dividend imputation across firms, and in particular, firms not paying dividends, as the effects of tax-induced dividend clienteles and the constraints on the impact of imputation are not considered. The objective of this paper is to evaluate corporate tax avoidance separately across firms paying dividends with tax credits, dividends without tax credits, and not paying dividends, where significant differences in the impact of dividend imputation on the incentives for corporate tax avoidance exist. 1 Additionally, this study evaluates the tax avoidance strategies available in an imputation setting that are in the best interests of shareholders, by controlling for outside director monitoring.

1- Hypothesis development

2- Methodology and variable construction

3- Data

4- Empirical results

5- Robustness tests

6- Conclusions

References

Abstract

This study documents the fact that large dividend increases are followed by a significant increase in leverage, consistent with management increasing the dividend to use up excess debt capacity. However, the leverage increase is not captured by a standard partial adjustment model of leverage. Nor does it reflect variables known to be related to dividend increases, such as firm maturity, investment, and risk. Instead, the dividend increase signals a complex change in the way firms adjust to their leverage target, but it does not signal a change in the target

Hypothesis development

Firms that make large dividend increases do so voluntarily. Models of dividend signaling suggest that this should be a signal of quality, implying increased future profits (Bhattacharya 1979; Miller and Rock 1985). However, the work of GMS fails to find the hypothesized increase in profits. Instead, they find a change in firm maturity and related variables. But a large part of firm maturity is predictable and so need not be signaled. The behavior they find which cannot be predicted before the dividend change includes declining reinvestment, so the dividend increase could be a signal of an unanticipated change in investment policy. Since investment policy and financing policy are closely linked through the pecking order view of financing, we hypothesize that the unanticipated change being signaled by a large dividend increase could include a change in financing policy. Specifically, we hypothesize that large dividend increases or dividend initiations signal a change in leverage policy of a type that could not be forecasted based on standard models of leverage. To be consistent with the move towards a more mature type of firm that is related to dividend increases, we hypothesize that the change is an increase in leverage. We require that the change is not related to predictable firm maturity variables, so that the dividend increase is a genuine signal: Hypothesis 1A: Firms making large dividend increases subsequently increase leverage in a way not predicted by standard models and not related to predictable firm maturity variables. The null hypothesis against which we test is that any change in leverage policy subsequent to a large dividend increase either is explained by standard models of leverage (trade-off, partial adjustment, or standard pecking order) or reflects the predictable maturing of the firm.

Abstract

We examine empirically the effect of managerial ability on firm-level investment efficiency and how this affects future stock price crash risk. Using a managerial ability measure developed by Demerjian et al. (2012), the paper documents consistent evidence that the more able managers over-invest compared to their not-so-able counterparts, even after controlling for the effects of financial reporting quality and other firm specific determinants of investment efficiency. This evidence is robust to alternative proxies for investment efficiency. The empirical evidence also suggests that crash risk increases for firms with more able managers, primarily through the investment inefficiency channel. Overall, the study contributes to a better understanding of the influence of managerial ability on investment decisions in the context of diverging opinions regarding manager-specific effects on organizational outcomes.

Introduction

We examine empirically the effect of managerial ability on firm-level investment efficiency and how this affects future stock price crash risk. Our study is motivated by the desire for a better assessment of the management’s impact on investment decisions and on stock price crash risk: an outcome of direct economic consequence for investors. According to the optimal investment argument proposed in the neo-classical framework, managers should continue investing until the marginal benefit of capital investment equals marginal costs. This proposition, however, is based on the assumption of no friction in the capital markets, i.e. managers obtain financing for positive net present value projects (NPVs) at the prevailing economy-wide interest rate and return excess cash to investors (e.g., Abel 1983; Hayashi, 1982; Yoshikawa, 1980). However, the agency theory view suggests that managerial self-interest might produce sub-optimal investment decisions resulting in both over- or under-investment. For example, both moral hazard and adverse selection imperfections inherent in the information asymmetry between managers and outside suppliers of capital, can adversely affect investment efficiency.

Managers intending to maximize their personal welfares are sometimes inclined to make investments that are not in the best interests of shareholders (Berle and Means, 1932; Jensen and Meckling, 1976; Jensen, 1986). Since there is divergence of incentives between mangers and investors, models of moral hazard suggest that managers will invest in negative NPVs. Models of adverse selection, on the other hand, suggest that if managers are better informed than investors about a firm’s prospects, they will try to time capital issuances to sell overpriced securities (i.e. a ‘lemons’ problem). If they are successful, they may over-invest these proceeds (e.g., Baker et al., 2003).

Abstract

The paper develops and analyzes a model of a firm’s market value as it relates to contemporaneous and future earnings, book values, and dividends. Two owners’ equity accounting constructs provide the underpinnings of the model: the clean surplus relation applies, and dividends reduce current book value but do not affect current earnings. The model satisfies many appealing properties, and it provides a useful benchmark when one conceptualizes how market value relates to accounting data and other information.

Résumé

L’auteur élabore et analyse un modèle dans lequel il conceptualise la relation entre la valeur marchande d’une entreprise et ses bénéfices, ses valeurs comptables et ses dividendes actuels et futurs. Deux postulats de la comptabilisation des capitaux propres servent de charpente au modèle: a) la relation du résultat global s’applique et b) les dividendes réduisent la valeur comptable actuelle sans influer, cependant, sur les bénéfices actuels. Le modèle présente de nombreuses propriétés intéressantes et il peut, fort utilement, servir de repère dans la conceptualisation de la relation entre la valeur marchande et les données comptables et autres renseignements.

In recent years, there has been considerable evolution in corporate social responsibility (CSR), specifically in the way that companies have begun approaching CSR as a new strategy for improving their image and gaining competitive advantage; this may increase firm value as highlighted by Robinson et al. (2011).1 The literature on CSR has shifted from focusing on the relationship between CSR and firm performance (e.g., Margolis and Walsh, 2003; Margolis et al., 2007), to several other relevant topics in corporate finance, such as the impact of CSR on the cost of capital (El Ghoul et al., 2011), debt maturity (Benlemlih, 2017), the capital structure (Girerd-Potin et al., 2011), and information asymmetry (Dhaliwal et al., 2011). Our paper is related but different from this existent literature. Indeed, most of prior studies focus on the value creation associated with high CSR involvement (e.g. Margolis and Walsh, 2003; Orlitzky, 2003). Yet, it is relevant to investigate to what extent CSR affects the distribution of this wealth. More precisely, our study focuses on the impact of CSR on dividend policy: one of the major financial decisions for most firms. Dividends are considered the most commonly used payout device in the corporate world. Since the dividend irrelevance theory posited by Miller and Modigliani (1961),2 extensive theoretical and empirical work has suggested different explanations of the dividend policy puzzle, namely, agency theory (e.g., Kalay, 1980), the “bird-in-the-hand” theory (e.g., Gordon, 1963; Lintner, 1962), signaling theory (e.g., Ross, 1977), and life-cycle theory (e.g., Fama and French, 2001). Despite substantial research, the dividend puzzle is far from being solved, even in the US context (Shao et al., 2010). Motivated by the importance of dividend policy in corporate finance, as well as the growing interest in CSR, this paper aims to define how dividend policy is influenced by firms’ CSR level. There are potentially two important theoretical arguments that could explain why CSR activities may have an effect on firm dividend policy. On the one hand, the first argument is based on the free cash flow argument of Jensen (1986). Jensen argues that managers with large free cash flow have incentives to overinvest beyond an optimal level. High dividend payout policy reduces the resources under managers’ control and constrains them from diverting free cash flow. From a CSR perspective, it is argued that managers derive private benefits from being identified as socially responsible (Brown et al., 2006). These private benefits associated with high CSR identification are likely to encourage overinvestment in social and environmental activities. This argument is particularly true when firms have access to high cash in place (Barnea and Rubin, 2010). If dividend policy serves as a disciplinary mechanism that avoids social overinvestment and prevents managers from wasting cash through high social expenditures, thus, we expect a positive relationship between CSR and dividend payout. On the other hand, the second argument is based on the signaling theory of dividends (e.g. Bhattacharya, 1979).

One of the main and more complex corporate financial decisions deals with the definition of the firm’s dividend policy, that is, the trade-off between distributing funds to shareholders and retaining the profits within the company. Marginal corporate and individual tax rates are one of the main factors that corporations ponder in such decision. Among emerging markets, Brazil is known as a country where such marginal tax rates are high, which suggests that companies pursue active tax planning strategies, which include changes in their dividend policies in response to changes in the tax legislation. This paper tests the influence of the tax preference theory on public Brazilian companies and is motivated, fundamentally, by the many changes in the tax legislation that Brazil has been through in this period, which makes for a good laboratory to study this problem. Another relevant aspect of this paper is the legal framework of corporate law in Brazil, which allows a firm to issue up to two-thirds of its total equity in nonvoting preferred shares. Therefore, to hold complete sway over a public corporation in Brazil, the controlling shareholders may have as little as 16.7 per cent of firm’s total equity. Such disproportional power raises obvious agency problems between majority and minority shareholders. Such legislation was originally established in 1976 by Act 6404/1076. It has been changed in 2001 by Act 10303/2001, which limited the maximum proportion of nonvoting shares to one-half. However, the new legislation preserved the status of existing companies. Thus, the new requirement applies only to firms, who were either created or went public after 2001, preserving the statutory privileges of existing ones. To investigate such problem, we collect data on 672 firms listed in the São Paulo Stock Exchange (Bovespa) between 1986 and 2011, making up a total of 30,134 observations. We identify the pertinent changes of the tax legislation and check the effect of such exogenous changes on corporate dividend policies of preferred and common shares of listed firms. The paper proceeds as follows: Section 2 presents a brief history of taxation law applied to dividend payments in Brazil. Section 3 summarizes previous empirical literature on this subject in Brazil. Section 4 presents the research method and describes the sample. Section 5 presents the results of our analysis. Section 6 concludes the paper.

مقاله سال 2017

According to the dividend signaling hypothesis, managers who know more inside information about future corporate growth convey that information to external investors through dividend payouts. Hence, signaling hypothesis suggests that there is a positive relation between the information asymmetry and dividend payouts. However, in their examination of US stock markets, Li and Zhao (2008) found a reverse relation between information asymmetry and dividend policy. In other words, when information asymmetry is lower, firms are more likely to pay out dividends, which is inconsistent with the signaling hypothesis inference. For agency problem theory, dividends can be a tool to mitigate the agency problem. Through distributing the free cash flow as dividends, the possibility of expropriation by managers can be reduced. La Porta et al. (1999) indicated that when a country has better institutional investor protection, dividends play a critical role in reducing the agency problem, while dividends are insignificant in countries with a weak investor protection environment. However, the focus in previous studies on information asymmetry and dividend policy mostly has mostly been on developed markets. Emerging markets are more inefficient and information asymmetry is higher. Therefore, the contradictions between information asymmetry and dividend policy require further examination, and Chinese markets are particularly critical. China is the second largest economy in the world but the development of their capital market development and corporate management are significantly different from what has occurred in developed countries. Lin and Su (2008) noted that Chinese markets are less developed and that reliable information is lacking. Therefore, China is a suitable platform from which to validate the relationship between information asymmetry and dividend policy. Eun and Huang (2007) studied the asset pricing mechanism of Chinese stock markets from 1995 to 2004, demonstrating that investors were willing to pay the premium price for firms with dividends. In China, the corporate governance mechanism can be strengthened by cash dividends. In another study, Lee and Xiao (2004) demonstrated that with an increase in corporate dividends, there would be a negative reaction in the markets. They suggested that this was because the controlling shareholders acquired corporate benefits through cash dividends and took advantage of minority shareholders.

Chen, Jian and Xu (2009) studied the dividend payouts of Chinese listed firms from 1994 to 2004 and found that the average dividend payout was 19.98%, the lowest payout ratio in the world. However, different firms had extremely different dividend payout ratios with some even reaching a 140% payout ratio. The motivations and incentives to pay out dividends differ between firms, with the controlling shareholder playing an important role in dividend policy. The ownership structure is critical to corporate goals and supervision of managers, and hence influences corporate profitability, dividend payout, capital structure, growth rate and diversification decision-making (Thomsen and Pedersen, 2000). Chen, Jian and Xu (2009) indicated that the dividend yields of the shares held by the controlling shareholder in Chinese listed firms could be up to 50%, while the dividend yields of the shares held by minority shareholders were lower than 2%. They suggested that the dividend payment is a channel for the expropriation of private benefits, and ownership structure is the key determinant of dividend payout. The uniqueness of the ownership structure in Chinese listed firms is that largest controlling shareholders are usually associated with the government. In addition, firms with concentrated ownership may disclose less information, making the problem of information asymmetry between the management and external shareholders more severe (Attig et al., 2006; Chen et al., 2008). In addition, the controlling shareholder can exploit minority shareholders through information asymmetry (Bae et al., 2002; Chang and Shin, 2007).

The controlling shareholder not only can easily acquire information, but can also decide when or how to introduce the related information to the capital markets. Thus, in Chinese listed firms, how the unique ownership structure influences information communication and affects the dividend policy are important issues of management. In addition, in 2005, China practiced a series of split share structure reforms which not only affected the ownership structure, but also influenced the information transparency of firms. Therefore, this study aims to examine whether information asymmetry influences the dividend policy of Chinese firms, and whether the ownership structure and China’s split share structure reform have moderating effects on the relationship between information asymmetry and dividend policy.

بررسی رابطه بین دو بخش مهم انتظارات سرمایه گذار در رابطه با سیاست سود های سهام نقدی و ثروت سهامداران در این مطالعه مورد بررسی قرار می گیرد . هنوز تعدادی از تلاش های تحقیقاتی برای یافتن این رابطه دقیق انجام می گیرند . این بررسی بر داده ای تکیه می کند که از شصت و هشت شرکت بورس سهام کراچی جمع آوری می گردد . سال مالی برای بعضی شرکت ها در ماه دسامبر پایان می یابد در حالی که شرکت های دیگر ماه ژوئن را برای اتمام سال مالی بر می گزینند . تحلیل به دو دسته تقسیم می گردد : 37 شرکت در یک دسته قرار می گیرند که حساب هایشان را در ماه ژوئن می بندند و از دوره 2003 تا 2007 را مد نظر قرار دادند نظر به این که 31 شرکت در دسته دوم قرار می گیرند که حساب های خودشان را در ماه دسامبر می بندند . دوره بررسی برای دسته دوم از سال 2004 تا 2007 بود . مدل حداقل مربعات معمولی و تاثیر ثابت مورد استفاده قرار می گیرند تا معادله رگرسیون را از طریق پذیرفتن برگشتی های سهام تخمین بزنند که به همانند متغیر و نسبت مدت برگشت سرمایه سود سهام به صورت متغیر توضیحی تشریح گردیدند . نتایج تحلیل نشان می دهند که برگشتی های سرمایه با سیاست سود سهام و اندازه شرکت همبستگی منفی دارند و با برگشتی های سرمایه در دارایی ها ، نسبت درامد به قیمت و رشد شرکت برای شرکت های با انتهای سال مالی ماه ژوئن همبستگی مثبت دارند . برگشتی های سرمایه برای شرکت های با انتهای سال مالی دسامبر با اندازه شرکت ، نسبت پرداخت های سود سهام و برگشتی های دارایی ها همبستگی منفی دارند . تحلیل آشکار می سازد که مدل OLS یک مدل خوب برای تخمین برگشتی های سرمایه نمی باشد اما مدل تاثیرات ثابت یک مدل خوب می باشد که می توان برای اهداف تخمینی استفاده نمود .