We examine firm valuation with optimal liquidity (retained earnings) and dividend choice under revenue uncertainty that incorporates debt financing and bankruptcy costs. We revisit the conditions for dividend policy irrelevancy and the role of retained earnings and dividends. Retained earnings have a net positive impact on firm value in the presence of growth options, high external financing co...

In this paper we investigate the optimal risk control and dividend distribution problem for a diffusion model with a terminal value. Usually the insurer cedes risk by means of a reinsurance contract, and pays dividends out dynamically from the surplus. Consider that the insurer is trying to balance risk control and dividend payout in terms of reinsurance and dividend distribution policies. Then...

This paper examines alternative ways that the value of CO2 emissions allowances created under cap-and-trade policy could be returned to households. One approach (based on principles of economic efficiency) is effectively a “tax shift” that would use revenues from an auction of CO2 emissions allowances to reduce preexisting distortionary taxes. A second approach (based on principles of property ...

The dividend policy is one of the most debated topics in the finance literature. According to the dividend signalling hypothesis, which has motivated a significant amount of theoretical and empirical research, dividend change announcements trigger share returns because they convey information about management’s assessment on firms’ future prospects. Consequently, a dividend increase (decrease) ...

In the talk we will address the problem of finding an optimal dividend policy for a class of jumpdiffusion processes. The jump component is a compound Poisson process with negative jumps, and the drift and diffusion components are assumed to satisfy some regularity and growth restrictions. With each dividend payment there is associated a fixed and a proportional cost. The aim is to maximize exp...

Dividend is the return that an investor receives when purchasing a company’s shares. The decision to pay these dividends to shareholders concerns several other groups of people, such as financial managers, consulting firms, individual and institutional investors, government and monitoring authorities, and creditors, just to name a few. The prediction and modelling of this decision has received ...

Using more than 112,000 firm-year observations in 33 countries, we find that two Hofstede’s cultural dimensions, uncertainty avoidance and long-term orientation, remain significant in the determination of dividend policy even after controlling for governance and firm-specific factors. When uncertainty avoidance is high, only firms in countries with stronger investor protection pay more dividend...

This paper develops and tests a dynamic, sequential equilibrium model of corporate cash payout policy that endogenizes a firm's dividend initiation decision, and its extreme reluctance to subsequently cut dividends in a sequential equilibrium. After payment of dividends, all excess cash is disgorged via stock repurchases that elicit no price reactions. The theoretical model generates results co...

The relative predictability of returns and dividends is a central issue because it forms the paradigm to interpret asset price variation. A little studied question is how dividend smoothing, as a choice of corporate policy, affects predictability. We show that even if dividends are supposed to be predictable without smoothing, dividend smoothing can bury this predictability. Because aggregate d...