[Back to Results | New Search]

Student Number	90428018
Author	Shih-Jen Chen(鄭世仁)
Author's Email Address	No Public.
Statistics	This thesis had been viewed 973 times. Download 0 times.
Department	Finance Management
Year	2004
Semester	2
Degree	Master
Type of Document	Master's Thesis
Language	English
Title	Relation Between Debt and Equity and Long-term Influence With Dividend Initiation
Date of Defense	2005-06-30
Page Count	52
Keyword	beta dividend initiation risk
Abstract	This paper examines the risk structure changes and the relation between debt financing and dividend payment. Our finding presents that the decrease in total equity risk is followed by the decrease in the residual variance, and there is also a decrease in equity beta after dividend initiation. Dividend payout is the main factor to reduce firms’ total equity risk and the most part of the decrease comes form the decrease in the residual variance. This study also identifies the influence of dividend initiation in earning per hare, turnover rate and outside shareholders. The result indicates that the sample firms only experience a significant increase in earning per share in year +1 but a decrease from year +2 to +5. We further identify the relation between debt and dividend with short-term and long-term method. We find that the firms with dividend increasing would likely choose lower debt to equity ratio, so the relation between debt and dividend is so-called substitution effect. Moreover, we implement the long-term method to justify the relation, and the result also shows that a substitution effect between debt and dividend, consistent previous result, but it is a transitory effect.
Table of Content	Contents 1. Introduction 1 2. Hypothesis development4 3. Sample Selection and Data Sources9  3.1 The Dividend Initiation Firms9  3.2 Matched sample selection procedure11 4. Changes in the Components of the Firms Following Dividend Initiation12  4.1Total Equity Risk12  4.2 Systematic Risk15  4.3 Unsystematic Risk17  4.4 Asset Risk19  4.5 Earning per Share21  4.6 Turnover Rate24  4.7 Outside Shareholders25 5. Relation between Debt Financing and Dividend Payment27  5.1 Short-term Relation between Debt and Dividend27  5.2 Long-term Relation between Debt and Dividend29 6. Conclusion30 List of Table Table 133 Table 234 Table 336 Table 438 Table 540 Table 642 Table 744 Table 846 Table 948 Table 1049 List of Figure Figure 135 Figure 235 Figure 337 Figure 437 Figure 539 Figure 639 Figure 741 Figure 841 Figure 943 Figure 1043 Figure 1145 Figure 1245 Figure 1347 Figure 1447 Figure 1550 Figure 1650 Reference51
Reference	[1]Barber, B. M., Lyon, J. D., 1996, Detecting abnormal operating performance: the empirical power and specification of test statistics, Journal of Financial Economics, Jul96, Vol. 41 Issue 3, p359 [2]Bhattacharya, S., 1979, Imperfect information, dividend policy, and "the bird in the hand" fallacy, Bell Journal of Economics, Spring79, Vol. 10 Issue 1, p259. [3]Dann, L. Y., Masulis, R. W., Mayers, D., 1991, Repurchase tender offers and earnings information., Journal of Accounting & Economics, Sep91, Vol. 14 Issue 3, p217 [4]Denis, D. J.; Kadlec, G. B. 1994, Corporate events, trading activity, and the estimation of systematic risk: evidence from equity..., Journal of Finance, Dec94, Vol. 49 Issue 5, p1787 [5]Durand, D., May, A. M., 1960, The ex-dividend behavior of American telephone and telegraph stock, Journal of Finance, Mar1960, Vol. 15 Issue 1, p19 [6]Fama, E. F., MacBeth, J. D, 1973, Risk, return, and equilibrium: empirical tests, Journal of Political Economy, May/Jun73, Vol. 81 Issue 3, p607. [7]Fama, E. F., 1974, The empirical relationships between the dividend and investment decisions of firms, American Economic Review, Jun74, Vol. 64 Issue 3, p304 [8]Fama, E.F.; French, K. ., 1992, The cross-section of expected stock returns, Journal of Finance, Jun92, Vol. 47 Issue 2, p427. [9]Gordon, M. J., 1963, Optimal investment and financing policy, Journal of Finance, May63, Vol. 18 Issue 2, p264, [10]Hamada, R. S., 1971, Investment decision with a general equilibrium mean-variance approach, Quarterly Journal of Economics, Nov71, Vol. 85 Issue 4, p667 [11]Hamada, R. S., 1972, The effect of the firm’s capital structure on the systematic risk of common stock, Journal of Finance, May72, Vol. 27 Issue 2, p435 [12]He, H, Wang, J, 1995, Differential informational and dynamic behavior of stock trading volum., Review of Financial Studies ,Winter96, Vol. 8 Issue 4. [13]Healy, P. M, Palepu, K. O., 1988, Earnings information conveyed by dividend inmations and omissions, Journal of Financial Economics, Sep88, Vol. 21 Issue 2, p149 [14]Healy, P. M, Palepu, K. G, 1990, Effectiveness of accounting-based dividend covenants, Journal of Accounting & Economics, Jan90, Vol. 12 Issue 1-3, p97 [15]Hertzel, M., Jain, P. C., 1991, Earnings and risk changes around stock repurchase tender offers, Journal of Accounting & Economics, Sep91, Vol. 14 Issue 3, p253. [16]Higgins, R. C., 1972(a), The corporate dividend-saving decision, Journal of Financial & Quantitative Analysis, Mar1972, Vol. 7 Issue 2, p1527 [17]Higgins, R. C., 1972(b), Dividend policy and increasing discount rates: a clarification, Journal of Financial & Quantitative Analysis, Jun72, Vol. 7 Issue 3, p1757 [18]Kandel, E., Pearson, N. D., 1995, Differential interpretation of public signals and trade in speculative markets, Journal of Political Economy, Aug95, Vol. 103 Issue 4, p831 [19]Karpoff, J. M., 1986, A theory of trading volume, Journal of Finance, Dec86, Vol. 41 Issue 5, p1069 [20]Kim, O., Verrecchia, R. E., 1991(a), Trading volume and price reactions to public announcements, Journal of Accounting Research, Autumn91, Vol. 29 Issue 2, p302 [21]Kim, O., Verrecchia, R. E., 1991(b), Market reaction to anticipated announcements, Journal of Financial Economics, Dec91, Vol. 30 Issue 2, p273 [22]Lakonishok, J., Shapiro, A. C., 1986, Systematic risk, total risk and size as determinants of stock market returns, Journal of Banking & Finance, Mar 86, p115 [23]Lewis, C. M., Rogalski, R. J., Seward, J. K., 2002, Risk changes around convertible debt offerings, Journal of Corporate Finance, 8, 67-80. [24]Lev, B., 1974, On the association between operating leverage and risk, Journal of Financial & Quantitative Analysis, Sep74, Vol. 9 Issue 4, p627 [25]Lintner, J., 1964, Optimal dividends and corporate growth under uncertainty, Quarterly Journal of Economics, Feb64, Vol. 78 Issue 1, p49 [26]Long, M. S., Malitz, I. B., Sefcik, S. F., 1994, An empirical examination of dividend policy following debt issues., Journal of Financial & Quantitative Analysis, Mar1994, Vol. 29 Issue 1, p131 [27]Loughran, T., Ritter, J. R., 1997, The operating performance of firms conducting seasoned equity offerings, Journal of Finance, Dec97, Vol. 52 Issue 5, p1823 [28]McCabe, G. M, 1979, The empirical relationship between investment and financing: a new look, Journal of Financial & Quantitative Analysis, Mar79, Vol. 14 Issue 1 [29]Miller, M. H., Rock, K., 1985, Dividend policy under asymmetric information, Journal of Finance, Sep85, Vol. 40 Issue 4, p1031. [30]Ofer, A. R., Siegel, D. R., 1987, Corporate financial policy, information, and market expectations: an empirical investigation of dividends, Journal of Finance, Sep87, Vol. 42 Issue 4, p889. [31]Pettengill, G. M., Sundaram, S., 1995, The conditional relation between beta and returns, Journal of Financial & Quantitative Analysis, Mar1995, Vol. 30 Issue 1, p101 [32]Rozeff, M. S, 1982, Growth, beta and agency costs as determinants of dividend payout ratios, Journal of Financial Research, Fall82, Vol. 5 Issue 3, p249
Advisor	Robin K. Chou(周冠男) Sheng-Syan Chen(陳聖賢)
Files	90428018.pdf disapprove authorization
Date of Submission	2005-07-05

[Back to Results | New Search]