In the absence of investment and dividend payments, the surplus is modeled by a Brownian motion. But now assume that the surplus earns investment income at a constant rate of credit interest. Dividends are paid to the shareholders according to a barrier strategy. It is shown how the expected discounted value of the dividends and the optimal dividend barrier can be calculated; Kummer’s confluent...

Adopting a probabilistic approach we determine the optimal dividend payout policy of firm whose surplus process follows controlled arithmetic Brownian motion and cash-flows are discounted at stochastic dynamic rate. Dividends can be paid to shareholders unrestricted rates so that problem is cast as one singular control. The interest rate modeled by Cox–Ingersoll–Ross (CIR) firm's objective maxi...

This paper examines the effect of governance and managerial alignment on dynamic dividend behavior of managers. I use a novel empirical approach to provide evidence on the role of governance and managerial alignment in explaining variation in dividend smoothing, incremental dividend decisions, and dynamic dividend behavior. Managers subject to weak monitoring and misaligned incentives are under...

In this paper we solve the dividend optimization problem for a corporation or a financial institution when the managers of the corporation are facing (regulatory) implementation delays. We consider several cash reservoir models for the firm including two mean-reverting processes, OrnsteinUhlenbeck and square-root processes. We provide our solution via a new characterization of the value functio...

Recent studies on the so-called double dividend hypothesis find that environmental tax swaps exacerbate the costs of the tax system and therefore do not produce a double dividend. We extend these models by incorporating a fixed-factor in the production of the polluting good and, therefore, allowing Ricardian rents to be generated in the economy. In this setting, an environmental tax reform with...