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Available. Open Access. Open Access
Article
Publication date: 30 November 2016

Sungmin Kim and Yongwon Jang

Firms can use dividends and/or share repurchases to distribute cash to shareholders. Jagannathan, Stephens, and Weisbach (2000) argue that managers tend to use dividends to pay…

208

Abstract

Firms can use dividends and/or share repurchases to distribute cash to shareholders. Jagannathan, Stephens, and Weisbach (2000) argue that managers tend to use dividends to pay out permanent cash flows and repurchases to pay out temporary cash flows. This paper examines Korean firms’ decisions on their choices between paying out cash flows in the form of dividends or share repurchases. We focus on the permanence of cash flows. To complete this analysis, we decompose cash flows into a transitory component and a permanent one of each firm, employing the approach of Beveridge and Nelson (1981). We find that higher permanent cash flows increase the probability of a dividend increase, while higher temporary cash flows increase the probability of repurchases. And Korean firms tend to choose both dividend change and repurchases when temporary cash flows increase, rather than to choose only repurchases without dividend change. These empirical results show that Korean firms take into consideration of permanence of cash flows in the choice of their payout methods.

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Journal of Derivatives and Quantitative Studies, vol. 24 no. 4
Type: Research Article
ISSN: 2713-6647

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Available. Open Access. Open Access
Article
Publication date: 20 June 2022

Eun Jung Lee, Sungmin Kim and Yongwon Jang

This paper examines whether long-term foreign investors may force firms to use a costly dividend to mitigate inefficient managerial behavior. The authors also hypothesize that the…

1553

Abstract

This paper examines whether long-term foreign investors may force firms to use a costly dividend to mitigate inefficient managerial behavior. The authors also hypothesize that the relation between foreign investment horizons and payout policy depends upon the extent of the corporate governance. The authors find that firms held by long-term foreign investors make dividend more often in the subsequent years. The authors also find that foreign investors with long-term investments do not cause firms to pay dividends when firms have strong corporate governance. It suggests that long-term foreign investors serve as a substitute for strong corporate governance with respect to controlling agency conflicts.

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Journal of Derivatives and Quantitative Studies: 선물연구, vol. 30 no. 3
Type: Research Article
ISSN: 1229-988X

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