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1、本科毕业论文（设计）外 文 翻 译原文：Dividend policy and the organization of capital markets How firms determine their dividend policy has been a puzzle to financial economists for many years. Miller and Modigliani (1961) (M&M), showed that under certain assumptions the payment of a cash dividend should have no impa
2、ct on a firms share price. M&M assumed that the firms investment is fixed, since all positive net present value projects will be financed regardless of the firms dividend policy. Consequently, the firms future free cash flow is independent of the firms financial policies, so that the dividend is the
3、 firms residual free cash flow. The fact that this result flies in the face of casual empiricism, not to mention most empirical studies,1 was called the dividend puzzle by Fischer Black (1976).Several strands of research have developed to explain actual dividend policies,focusing on relaxing some of
4、 the M&M assumptions. Brennan (1970), for example,relaxed the equal tax assumption. However, in Brennans model the higher thedividend the higher the tax penalty. Consequently, a tax wedge drives up the pre-tax investor required rate of return for high payout firms. Despite extensive empirical invest
5、igation this hypothesis does not seem to be borne out by the data.Moreover,Poterba (1987) has documented the remarkable stability of dividend payouts throughout periods of extensive tax changes in the USA.While the impact of taxes remains inconclusive, increasing attention has been given to the prob
6、lem of information asymmetries. Miller and Modigliani explicitly suggested that dividend changes could have an informational impact.Subsequent research by Watts (1973) and others have documented that initiating a dividend increases the share price and cutting a dividend generally leads to a price de
7、cline. Information asymmetries have also given rise to agency cost explanations for paying dividends. With the increased separation of ownership from control, managers frequently face very little supervision. In this context, a commitment to a high dividend policy attenuates managerial opportunism a
8、nd forces the firm to frequently interact with the capital market.A central message of asymmetric information models is that dividend payments are important both as a pre-commitment device to reduce agency costs and as a signal of managements expectations of future earnings. Both models have been us
9、ed to justify Lintners observation (1956) that actual dividend policies tend to follow a slowly adaptive process. However, the viability of both of these mechanisms depends on other aspects of the institutional and contracting environment. For example, if the firm is closely held there might be easi
10、er and less costly ways of communicating information than by paying a dividend. Similarly, managerial control issues may be less severe in a bank centric market characterized by constant monitoring of corporate activities by lending officers.There are a variety of ways of characterizing institutiona
11、l differences, but Mayer(1990) hit on one key difference: the Anglo-Saxon capital markets model compared to the Continental-German-Japanese banking model. The critical difference as Rajan (1992) pointed out is that the capital markets perspective relies onarms length contracting by uninformed invest
12、ors, whereas bank debt is a contract between an informed investor frequently privy to confidential information not available in the capital market. We would expect these marked differences in the organization of the financial system to impact corporate financial policy, particularlythe use of divide
13、nds as both a signaling and pre-commitment device.In this paper, we take advantage of the recent development of an international database by the World Bank that allows for cross-country comparisons of dividend policy. Financial data is available for the largest firms from eight emerging market count
14、ries: Korea, India, Pakistan, Thailand, Malaysia, Turkey and Zimbabwe between1980 and 1990. We analyze the dividend policies of firms from these countries, as well as the key institutional features of each country, and compare them with a control sample of US firms. Dividend signaling models offer v
15、aluable insights about the role of dividends. In particular they explain why dividends are more stable than earnings and why firmsare reluctant to cut dividends. In the former case, as long as underlying permanent earnings are more stable than actual earnings, the dividend will also be more stable,s
16、ince management is signaling its view as to the underlying permanent earnings. Inthe later case, a dividend cut indicates that the corresponding earnings decline ispermanent, not temporary and cyclical.Informational asymmetries and contracting costs can also generate agency costs.Consider, for examp
17、le, a firm that is financed with 100% equity with insiders or management as a control group and a widely dispersed group of outside stockholders. Jensen and Meckling (1976) illustrate that with little external control, managers and insiders will indulge in excessive perquisite consumption either thr
18、ough outright consumption of corporate resources or through inefficient management and inappropriate investment policies. In such a framework outsiders may prefer a high dividend policy: better a dividend today than a highly uncertain capital gain from questionable future investment. In the absence
19、of a strong contractual and legal framework to discipline insiders, for example by elections of outside directors, a pre-commitment to pay significant dividends may be the only way that insiders can raise capital. In the extreme case, a 100% dividend payout forces the firm to bid back the lost equit
20、y capital on the open market.5 Consequently, a high dividend payout helps in minimizing agency costs.The implication of both these arguments is that dividend payments will be higherwhere there are dispersed outsider investors, as long as the firm is in continuous need of equity capital and thus forc
21、ed to interact with the capital market.The role of the institutional structure through which the firms raises capital is thus important for dividend policy.Rajan (1992) showed the difference between bonds and bank debt is in theinformation acquisition process and the potential for renegotiating the
22、contract. Thekey is that bank debt is a contract between an informed provider of debt capital whohas access to current corporate information, much of it confidential. The banking relationship usually requires the filing of quarterly financial information in a standardized form, as well as regular si
23、te visits by the lending officer, so that the lending officer is familiar with the company. Moreover, much of the bank debt is either short term or involves material adverse conditions clauses that effectivelygive the bank an almost continuous call option on its loan. Consequently, there is asignifi
24、cant reduction in the extent of the moral hazard problem, as well as of agency costs. This risk reduction is accentuated by the practice of recovering the loan principal through monthly mortgage type payments. In essence this practice serves the same pre-commitment function as a dividend. It is not
25、surprising therefore, that James (1987) found that the announcement of a credit facility was accompanied by a 1.7% 2-day abnormal equity return. In many ways initiating a banking relationship is equivalent to the initiation of a dividend: both signal higher quality firms and a pre-commitment to cash
26、 outlays.In contrast to bank debt (inside debt), Diamond (1991) characterizes public debt or bonds as involving less monitoring. As a result there is less emphasis (and cost) on information gathering and on the renegotiation process discussed by Rajan. The key features instead are the existence of a
27、 track record and a public reputation. In stark contrast to bank debt, bond investors tend to rely heavily on public information reflected in bond ratings, a history of dividend payments, and simple financial ratios. In such a context the pre-commitment to pay dividends may be more important than fo
28、r a firm relying solely on bank debt, particularly when many institutions are restricted to investing in the public debt of dividend paying firms only. Consequently, dividend policy may be a more useful pre-commitment and signaling mechanism in financial systems that are more heavily reliant on arms
29、 length transactions.We term this role for dividend payments the substitute hypothesis, in the sense that the dividends substitute for direct communication with the external investors in the firm, both debt and equity. This substitute hypothesis implies that there should be significant differences i
30、n dividend policy across countries with different institutional structures. In particular, dividend policy should be more important for firms operating in arms length capital markets, rather than in internal bank centric markets. Dewenter and Warther (1998) made a similar point when they argued that
31、 stable dividend payments may not be as important for firms in Japan that are part of a Keiretsu network, due to the close ties between managers and investors. In contrast to the substitute hypothesis, one could argue that dividends reinforce rather than substitute for other mechanisms in controllin
32、g agency and information problems. We term this the complement hypothesis. La Porta et al(1998) argue that the lack of transparency, inadequate legal infrastructure, and weak investment protection in emerging markets all enhance the role of dividends as a reputation mechanism. In this case, and desp
33、ite the close banking relations and closely held nature of the firms, the payment of a dividend is necessary to attract capital.With the substitute hypothesis we would expect dividends to be more predictable in arms length capital markets to provide the assurance to external investors that the firms
34、 operations are sound. In contrast, in bank centric markets we would expect this communication to be immediate and the dividends to reflect the firms unpredictable internal cash flow. In particular, we test1) Do firms in these emerging markets have less predictable dividend paymentsthan firms in the
35、 USA? and2) Are dividends for firms in emerging markets less sensitive to past dividends and more sensitive to current earnings than US firms?We know that Lintner style dividend smoothing characterizes the policy of many US firms and that this stems from an arms length capital markets perspective. W
36、ith the substitute hypothesis we would not expect Lintners model to hold as well for emerging market firms.These hypotheses are inter-related, but if we find the answer is generally yes, we take this as support for the substitute theory of dividend policy. On the other hand, if we find that dividend
37、 policy in these emerging markets is predictable and can be characterized quite accurately by a Lintner model, we take this as support for the complement theory of dividend policy.Table 4 provides summary statistics on dividend policy and some key financial ratios for companies in each of our eight
38、emerging countries and the USA. Since all the values are ratios, they are sometimes skewed when dividing by small numbers. For this reason the median and mean are both reported, along with the standard deviation. As well, all observations lying outside three standard deviations from the mean were re
39、moved. The standard ratios for analyzing dividend policy are the dividend yield, which in this case is the annual dividend divided by the average of the years high and low stock price, and the dividend payout, which is the ratio of the dividend paid to the earnings per share.17 Key financial ratios
40、are the return on equity (ROE) as a measure of profitability, the debt ratio and the interest coverage ratio as measures of credit worthiness and the current ratio as a measure of liquidity.For the eight emerging markets the median payout ratios are similar to those of the US firms, with only Turkis
41、h companies obviously higher, and Pakistani firms lower. In contrast, median dividend yields are higher in all these emerging market countries than in the USA. This indicates that the emerging market firms tend to payout approximately the same as their US counterparts but the much greater depth in t
42、he US stock market values these dividends much higher. This again is an indicator of the relative under-development of stock markets in these countries. Interestingly again Malaysia is closest to the USA with a median dividend yield of 2.0%, while the big difference in the Korean mean and median div
43、idend yields is mainly a function of time: in the earlier period the moribund state of Korean markets lead to high dividend yields that were erased by the end of the period. A major conclusion from the discriminant analysis and the sample statistics is that there is greater dividend instability, in
44、the sense of unpredictability, in our sample of emerging market firms than there is in the US control sample. This is consistent with our prior theorizing that bank centric financial systems place less weight on the dividend as either a signaling or pre-commitment device. Contrary to our financial s
45、ystems taxonomy, this conclusion is as valid for Korea and Malaysia, which we regarded as most like the US as it is for Jordan, which we regarded as the most developed bank oriented system. In all these emerging markets it appears that other control mechanisms serve the dividend signaling and agency
46、 reduction role it play in the US arms length capital markets system.This paper examined the dividend behavior of companies in eight emerging markets between 1980 and 1990, and compared the results to those for 100 US companies. We reached the following conclusions:1) Generally it is more difficult
47、to predict dividend changes for these emerging market firms. The quality of firms cutting dividends were much more similar to those increasing dividends, than for the US control sample.2) Regression results suggested that current dividends are much less sensitive to past dividends than for the US co
48、ntrol sample of firms.3) The Lintner model does not work very well for this sample of emerging market firms, with adjusted R squares of the Lintner regression model well below what we expect for US firms.These results provide support for the substitute theory of dividends over the complement theory
49、in our sample of emerging market firms. In other words, the results support the premise that the institutional structures of these developing countries make corporate dividend policy a less viable mechanism for signaling future earnings, and for reducing agency costs than for US firms operating in capital markets with arms length transactions.Source：Aivazian , Laurence Booth ,Sean Cleary . “Dividend policy and the organ
