Summary articles Advanced Corporate FinanceAdvanced Corporate Finance (Universiteit van Amsterdam)Verspreiden niet toegestaan | Gedownload door Sanne van den Brink ([email protected])lOMoARcPSD|94087
Summary mandatory articles Advanced CorporateFinance1) Michaely, R., Roberts, M.R., Corporate Dividends Policies: Lessons from Private Firms, 2012They compared the dividend policies of publicly and privately held frms in order to help identfy the forces shaping corporate dividends and shed light on the behavior of privately held companies. We show that private frms smooth dividends signifcantly less than their public counterparts, suggestng that the scrutny of public capital markets plays a central role in the propensity of frms to smooth dividends over tme. Public frms pay relatvely higher dividends that tend to be more sensitve to changes in investment opportunites than otherwise similar private frms. Ultmately, ownership structure and incentves play key roles in shaping dividend policies. Reasons whyfrms are so reluctant to cut dividends or why they appear to smooth dividends:1) empirical evidence shows that managements reluctance to cut dividends is partly driven by investors’ reactons to such announcements. This holds for public frms and way less for private frms. 2) managers of private frms view the consequences of dividends cuts and omissions as less severe than their public counterparts, primarily because of diferences in informaton content. Private frm’s dividend polices are more erratc. 3) Smoothing of dividends can also be derived from the diference in informaton (asymmetric informaton) or to agency issues. Public enttes are more likely to increase their dividends but their increases are signifcantly smaller than increases of private enttes. Taxes are unlikely to afect solelythe diference in dividend policy between public and private frms. Nonetheless, taxes may play a role via diferences in the ownership structure. For example, it is possible that the marginal investors of private and public frms are subject to diferent tax rates. Public frms have greater access to external capital than private frms so private frms may be less willing to distribute cash, which represents a relatvely low marginal cost source of funds. Ownership structure, atendant informaton environment and incentve conficts are important for dividend policy. Private frms with dispersed ownership pay lower dividends than public frms with similar characteristcs. Firm that have transitoned from being private to public also increased their dividends around the transiton tme. Divided smoothing is closely linked to whether frms are privately or publicly traded. Public frms are more reluctant to cut dividends and they overall smooth dividends much more than private frms, regardless of their ownership structure. Private frms have a greater sensitvity of dividends to earnings and investment opportunites.