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 research paper we have discussed various theories regarding the impact of dividend policy on the performance of the firms. We have also analyzed these theories in the light of the companies that are practically undergoing through the debate of determining the key factors, which play a crucial role in measuring the performance of the companies. There can not only be a single determinant ...

We examine the relation between institutional holdings and payout policy in U.S. public firms between 1980 and 1996. We find that payout policy affects institutional holdings. Institutions avoid firms that do not pay any dividends. But among dividend paying firms, they prefer firms that pay fewer dividends. Our evidence indicates that institutions prefer firms that repurchase shares, and regula...

In some classes of models, taxes at the owner level are “neutral” and have no effect on firm activity. However, this tax neutrality is sensitive to assumptions and no longer holds in more complex models. We review recent research that incorporates greater complexity in studying the link between taxes and business activity – particularly entrepreneurship. Dividend taxes on owners of large firms ...

Blockholder ownership may increase firm value because of incentive alignment or lower it because of expropriation of minority investors. Dividend policy provides a way to distinguish between the two effects since large owners may prefer low dividends if they derive private benefits from controlling firms, while minority investors may prefer high dividends that benefit all shareholders. I examin...

We study competitive equilibria in a signaling economy with heterogeneously informed buyers. In terms of the classic Spence (1973) model of job market signaling, firms have access to direct but imperfect information about worker types, in addition to observing their education. Firms can be ranked according to the quality of their information, i.e. their expertise. In equilibrium, some high type...

We investigate whether controlling shareholders expropriate corporate resources during a financial crisis using the data of Thai firms. Our results are consistent with the argument of Friedman, Johnson, and Mitton (2003) that the propensity to tunnel and prop is higher for business groups in particular if they are organized in pyramids. Specifically, we find that firms that belong to the top 30...