Country dummies firm level variables full model group

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Country Dummies Firm-Level Variables Full Model Group: Pooled Constant 0 . 024 (15 . 7) 0 . 056 (14 . 0) 0 . 060 (11 . 7) 0 . 095 (23 . 1) Busrisk 0 . 186 (7 . 5) 0 . 038 (1 . 6) 0 . 01 (0 . 40) Size 0 . 015 (0 . 5) 0 . 081 (1 . 3) 0 . 525 ( 15 . 1) Tangibility 0 . 015 ( 3 . 8) 0 . 035 ( 8 . 7) 0 . 034 ( 8 . 2) ROE 0 . 061 (13 . 0) 0 . 035 (7 . 8) 0 . 047 (10 . 5) M/B 0 . 002 (4 . 1) 0 . 004 (6 . 5) 0 . 004 (7 . 5) Debt ratio 0 . 066 ( 15 . 1) 0 . 102 ( 21 . 2) 0 . 089 ( 21 . 0) Korea 0 . 011 ( 5 . 0) 0 . 029 (7 . 6) India 0 . 000 ( 0 . 0) 0 . 022 (4 . 5) Malaysia 0 . 018 (7 . 5) 0 . 023 (6 . 1) Thailand 0 . 039 (10 . 4) 0 . 036 (6 . 7) Zimbabwe 0 . 045 (6 . 7) 0 . 047 (7 . 1) Jordan 0 . 021 (6 . 8) 0 . 033 (10 . 5) Pakistan 0 . 090 (23 . 7) 0 . 114 (29 . 7) Turkey 0 . 041 (6 . 3) 0 . 056 (8 . 5) Most like U.S. 0 . 054 (19 . 9) Least like U.S. 0 . 072 (23 . 8) Other 0 . 052 (18 . 2) Adjusted R 2 18 . 0% 13 . 5% 29 . 6% 24 . 1% Note: Regression estimates of debt and total assets against the independent variables indicated in the row headings. The t- statistics are given in parentheses. Each model has 4,282 observations. Busrisk is the standard deviation of the return on investment. Size is the natural logarithm of sales in local currency. Tangibility is the tangibility of assets: total assets minus current assets dividend by total assets. ROE is the net income divided by stockholder s equity. M/B is the market value of the common stock divided by its book value. The debt ratio is total liabilities divided by total assets. apparent across the countries. Overall, the evidence suggests that the responsiveness of dividend policy to firm-level factors differs across these emerging markets, although they seem to have more in common with each other than with the United States. We now examine the direct influence of country or institutional factors on dividend policies, following Booth et al. s (2001) analysis of capital structure. We regress dividends to total assets on a set of country dummy variables. We use the United States as the reference point, so that the coefficients on the dummy variables measure the significance of dividend policy differences relative to the United States. These results are reported in the first column of Table 7. The adjusted R 2 of the regression is 18.0%, and all of the dummy variables are significant except the one for India. This supports our earlier assertion that there are significant differences across these countries in terms of their dividend policies. The second column in Table 7 provides regression estimates of the simple empirical dividend policy model with no country dummies. This model is wrong because the data reported in Table 6 already show that the coefficients are sig- nificantly different in some of these countries, although this model forces all of
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386 The Journal of Financial Research them to be the same. However, it is a measure of the effectiveness of the financial variables alone in understanding dividend policy. In this case the adjusted R 2 is 13.5%. This is not surprising, given that our previous results already demonstrate the existence of significant heterogeneity across these countries. Country factors are at least as important as the firm-level variables used to examine dividend policy in these countries.
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