Professional Documents
Culture Documents
= + + + +
+ +
, 1 7 , 1
8 , 1 9 , 1 10 , 1 11 , 1 12 , 1
13 , 1 14 , 1
- 4
+
i t i t
i t i t i t i t i t
i t i t
on digit Effective tax rate
Long term debt Cash Collateral value of asset Risk Profitability
Size Age
|
| | | | |
| |
+
+ + + + +
+ +
15 , 1 ,
- -
i t i t
Market to book value | c
+
Where Multinationality
i,t
represents the multinationality feature of a firm. This is the base model and various
extensions will be implemented to cater for various aspect of different theory testing purposes. In addition to
ordinary least square regression technique, Probit regression is considered specially when dependent variable
takes a form of 0 or 1 to indicate dividend payer vs. non-payer dividends and also dividend increase vs.
decrease.
4. Results
4.1 Summary Statistics
Table 5 (Panel A and Panel B) presents summary statistics. It shows that cash dividend payments for MCs are
39% of net income on average and for DCs it is 42%. This difference is statistically significant at the 5%
significance level. MCs having lower cash dividend relative to their counterpart DCs may be an indication that
Australian MCs face more risks through international operations leading to more volatile cash flows to distribute
as cash dividends. We observe a lesser proportion of off-market share repurchase, on-market share repurchase
and special cash dividend type dividend payments executed by MCs in comparison to DCs. The result of the
political risk factor shows that Australian MCs are experiencing relatively more uncertainty than DCs (75.99 vs.
82.66). The average diversification figure for MCs is 2.54, which is statistically higher than DCs (0.04).
However, no significant difference is detected between MCs and DCs for 2-digit and 4-digit industry level
diversification. Consistent with Akhtar (2005), on average Australian MCs have significantly lower long term
debt than (0.27 vs. 0.36). Profitability and firm age variables indicate that Australian MCs are more profitable
than their counterpart DCs and also more mature. Similarly, Australian MCs on average experience more
growth opportunities than DCs.
24
Panel B, shows individual linear relationships each variable has with the dependent variables and also within the
independent variables. No harmful multicolinearity is observed and correlations are reasonably within the
acceptable range of the correlation bench mark (Keller, 2008).
25
Table 5
Descriptive statistics for sample variables
Panel A
C
a
s
h
D
i
v
i
d
e
n
d
[
1
]
O
f
f
M
a
r
k
e
t
[
2
]
O
n
M
a
r
k
e
t
[
3
]
S
p
e
c
i
a
l
c
a
s
h
d
i
v
i
d
e
n
d
[
4
]
T
o
t
a
l
d
i
v
i
d
e
n
d
[
5
]
N
e
t
D
i
v
i
d
e
n
d
s
[
6
]
P
o
l
i
t
i
c
a
l
r
i
s
k
[
7
]
F
o
r
e
i
g
n
e
x
c
h
a
n
g
e
r
i
s
k
[
8
]
G
e
o
g
r
a
p
h
i
c
a
l
d
i
v
e
r
s
i
f
i
c
a
t
i
o
n
[
9
]
I
n
d
u
s
t
r
y
d
i
v
e
r
s
i
f
i
c
a
t
i
o
n
(
2
d
i
g
i
t
)
[
1
0
]
I
n
d
u
s
t
r
y
d
i
v
e
r
s
i
f
i
c
a
t
i
o
n
(
4
d
i
g
i
t
)
[
1
1
]
E
f
f
e
c
t
i
v
e
t
a
x
[
1
2
]
L
o
n
g
t
e
r
m
d
e
b
t
[
1
3
]
C
a
s
h
[
1
4
]
C
o
l
l
a
t
e
r
a
l
v
a
l
u
e
o
f
a
s
s
e
t
s
[
1
5
]
R
i
s
k
[
1
6
]
P
r
o
f
i
t
a
b
i
l
i
t
y
[
1
7
]
T
o
t
a
l
a
s
s
e
t
[
1
8
]
F
i
r
m
'
s
a
g
e
[
1
9
]
M
a
r
k
e
t
-
t
o
-
b
o
o
k
v
a
l
u
e
[
2
0
]
MCs
Mean 0.39 0.03 0.05 0.09 0.59 0.37 75.99 0.01 2.54 0.95 0.96 0.21 0.27 0.12 0.61 0.06 2.96 5.96 3.28 2.32
Median 0.37 0.05 0.09 0.15 0.54
0.28
80.50 0.00 2.01 1.00 1.00 0.26 0.17 0.06 0.63 0.05 0.46 5.88 3.22 1.73
Maximum 2.48 0.16 0.22 0.30 3.68
0.98
90.11 3.67 12.15 1.00 1.00 0.49 0.65 0.98 0.89 0.31 7.87 11.53 5.12 8.61
Minimum 0.00 0.00 0.00 0.00 0.00
0.00
25.15 -3.52 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.16 0.00 0.00
Std. Dev. 1.12 1.98 1.18 1.53 1.25
0.37
14.74 0.43 1.60 0.07 0.13 1.73 0.53 0.16 0.21 0.04 2.38 1.95 0.92 1.84
DCs
Mean 0.42 0.04 0.07 0.10 0.63
0.35
82.66 0.00 0.04 0.95 0.97 0.16 0.36 0.12 0.62 0.06 1.10 5.28 3.09 2.23
Median 0.39 0.09 0.18 0.26 0.47
0.22
87.00 0.00 0.00 1.00 1.00 0.27 0.19 0.05 0.68 0.04 0.37 5.26 3.04 1.58
Maximum 3.18 0.86 0.25 0.56 4.29
0.97
89.00 3.43 5.91 1.00 1.00 0.51 0.52 0.99 0.95 0.62 3.92 11.40 5.14 8.42
Minimum 0.00 0.00 0.00 0.00 0.00
0.00
35.50 -3.57 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Std. Dev. 1.17 1.64 2.17 2.68 1.28
0.29
13.53 0.41 0.29 0.08 0.12 0.71 0.56 0.18 0.25 0.05 2.04 1.84 0.94 1.88
The ordinary least square regression is conducted using full sample of 2749 of which 973 are MCs and the remaining being DCs (1776). The dependent variable DIV takes six different
dividend payment measurements. For example, regular cash dividend is defined as regular cash to net income; off-market is calculated as the total amount spent on off-market share
repurchase in the entire financial year scaled by on-market is calculated as total amount spent on on-market share buyback for the financial year scaled by net income; and total dividend is
calculated as sum of regular dividends, off-market share repurchase, on-market share repurchase amount for the financial year, special cash dividends, bonus share plan, special cash
dividends and scaled by net income and finally net dividend I calculated as total dividends minus new equity issue (via dividend reinvestment plans, right issue, public issues or private
placements). The independent variables are: Political risk is the sum of all the MCs subsidiaries countries political risk ratings exposed to the proportion of each sale that a subsidiary
makes overseas. Foreign exchange risk FX is proxied by regression coefficient of trade weighted index. The regression is performed on every firms weekly (52 observations per year)
against all ordinaries index and trade weighted index. Geographical diversification is measured as ln(Foreign sales proportion times by total number of subsidiaries across countries).
Industry level diversification is measured as 1 minus the Harfindahl index and this procedure is followed for both two digit GICS code industry level diversification and four digit GICS
codes industry level diversification. Effective tax rate is measured as tax paid scaled by pretax income. Leverage is measured as the total debt to total debt and market value of equity.
Leverage is measured as the total debt to total debt and market value of equity. Cash is estimated as proportion of cash to total assets. Collateral value of asset is measured as fixed asset to
total assets. Risk is measured as standard deviation of firms stock return over a year using weekly observations. Profitability is measured as net income over total assets. Size is calculated
as ln(total asset). Firms age is the natural logarithm of the age of the firm in years from date of incorporation. Market-to-book is sum of market value of equity and book value of equity
scaled by book value of total assets.
26
Panel B
C
a
s
h
D
i
v
i
d
e
n
d
[
1
]
O
f
f
M
a
r
k
e
t
[
2
]
O
n
M
a
r
k
e
t
[
3
]
S
p
e
c
i
a
l
c
a
s
h
d
i
v
i
d
e
n
d
[
4
]
T
o
t
a
l
d
i
v
i
d
e
n
d
[
5
]
N
e
t
D
i
v
i
d
e
n
d
s
[
6
]
P
o
l
i
t
i
c
a
l
r
i
s
k
[
7
]
F
o
r
e
i
g
n
e
x
c
h
a
n
g
e
r
i
s
k
[
8
]
G
e
o
g
r
a
p
h
i
c
a
l
d
i
v
e
r
s
i
f
i
c
a
t
i
o
n
[
9
]
I
n
d
u
s
t
r
y
d
i
v
e
r
s
i
f
i
c
a
t
i
o
n
(
2
d
i
g
i
t
)
[
1
0
]
I
n
d
u
s
t
r
y
d
i
v
e
r
s
i
f
i
c
a
t
i
o
n
(
4
d
i
g
i
t
)
[
1
1
]
E
f
f
e
c
t
i
v
e
t
a
x
[
1
2
]
L
o
n
g
t
e
r
m
d
e
b
t
[
1
3
]
C
a
s
h
[
1
4
]
C
o
l
l
a
t
e
r
a
l
v
a
l
u
e
o
f
a
s
s
e
t
s
[
1
5
]
R
i
s
k
[
1
6
]
P
r
o
f
i
t
a
b
i
l
i
t
y
[
1
7
]
T
o
t
a
l
a
s
s
e
t
[
1
8
]
F
i
r
m
s
a
g
e
[
1
9
]
M
a
r
k
e
t
-
t
o
-
b
o
o
k
v
a
l
u
e
[
2
0
]
[1] 1.00
[2] -0.04 1.00
[3] 0.30 0.59 1.00
[4] 0.57 -0.21 -0.15 1.00
[5] 0.83 0.79 0.73 0.90 1.00
[6] 0.60 0.68 0.66 0.59 0.64
1.00
[7] 0.05 0.09 0.12 0.04 0.05 0.04 1.00
[8] -0.06 0.22 -0.18 0.07 -0.05 -0.01 0.05 1.00
[9] -0.03 -0.12 -0.12 0.09 -0.01 -0.01 -0.36 0.00 1.00
[10] -0.07 0.06 0.06 0.07 -0.06 -0.10 -0.02 0.03 -0.03 1.00
[11] -0.06 0.05 0.05 0.07 -0.04 -0.02 -0.01 0.06 -0.07 0.64 1.00
[12] 0.04 -0.04 0.11 -0.26 0.03 0.00 0.04 -0.01 0.01 -0.01 -0.01 1.00
[13] 0.03 -0.10 -0.08 -0.07 0.00 0.14 0.06 0.00 -0.02 -0.03 -0.04 -0.03 1.00
[14] -0.25 0.27 0.30 0.00 -0.18 -0.09 -0.04 0.03 0.04 0.06 -0.06 -0.03 -0.19 1.00
[15] 0.02 -0.26 -0.19 -0.07 -0.01 -0.02 0.02 -0.02 -0.01 -0.07 0.01 -0.02 0.22 -0.50 1.00
[16] -0.32 -0.07 -0.03 0.06 -0.27 -0.15 0.06 0.13 -0.01 0.09 0.08 -0.07 0.08 0.30 -0.05 1.00
[17] 0.03 -0.02 0.16 0.29 0.02 0.02 0.01 -0.01 -0.01 0.00 0.00 -0.01 0.00 -0.03 0.00 -0.03 1.00
[18] 0.30 -0.13 -0.07 -0.19 0.25 0.21 -0.05 -0.06 0.21 -0.30 -0.27 0.05 0.19 -0.40 0.33 -0.51 0.05 1.00
[19] 0.14 0.04 -0.18 -0.03 0.12 0.11 -0.04 0.02 0.13 -0.18 -0.14 0.00 0.03 -0.12 -0.03 -0.15 0.04 0.28 1.00
[20] -0.03 0.35 0.13 -0.13 0.00 0.05 -0.04 -0.01 0.07 -0.07 -0.09 0.00 -0.34 0.22 -0.16 -0.05 0.00 -0.07 -0.095 1.00
27
4.2 Regression Analysis
4.2.1 Does multinational of a firm matter across different payout ratios and what are the determinants?
The regression analysis presented in Table 6 shows six sets of regression results on a pooled sample of MCs and
DCs. To observe whether multinationality of a firm has any impact in explaining the difference of firms
various forms of dividend payout methods, a dichotomous variable of MULT
i,t
(1 being multinational, 0
otherwise) has been employed. Interestingly, the results shows that Australian MCs pay significantly less cash
dividends (t=-1.96), special cash dividends (t=-2.50), total dividends (t=-2.03) and net dividends (t=-2.41) to its
shareholders relative to DCs but a similar significant result is not observed for off-market and on-market share
repurchase types of dividend payments.
25
multinationality effect on dividend payments can be multidimensional
(eg., the risks and benefits of holding assets in foreign countries, earning income through foreign sales and
having foreign subsidiaries in multiple countries) and this multidimentionality may be explained by the slope
difference of chosen international and firm specific factors; hence Table 7 investigates the slope difference of
each of the estimated coefficients. Continuing with Table 6 results, the significant determining factors across
different method of dividend payout vary. For example, political risk explains cash dividends (t=2.89), total
dividends (t=2.35) and net dividends (t=2.00) while foreign exchange risk is a significant determinant in
explaining cash dividend (t=-1.98), on-market share repurchase (t=-1.67) and total dividends (t=-2.36). Among
other variables, cash, collateral value of assets, risk and size factors became consistently significant in explaining
most methods of dividend payments.
The significant positive coefficient of political risk factor suggests that an increase in the ratings (indicating a
safe zone) assist firms to significantly increase cash, total and net dividends respectively (t=2.89, t=2.35 and
t=2.00). This result is consistent with Kim and Mei (1994) and Bailey and Chung (1995). They argue that
political risk has significant effect on firms profit level and profit distribution to its shareholders. The positive
significant estimate explain that Australian firms dividend distributions are complemented in a positive way by
their foreign countries subsidiaries when they are able to operate and earn income in politically safe
25
A further explanation of this result is investigated in Table 7 which will explore the determining factors that play role to produce such
result.
28
environment which are not adversely affected by the political changes such as expropriation, civil disorders,
currency controls, investment restrictions, and other laws and regulations.
Consistent with the theoretical arguments, an increase in foreign exchange exposure has significant negative
effect in the paying cash, on market and total dividends (t=-1.98, t=-1.67 and t=-2.36) and this is consistent with
Adler and Dumas (1984). This result indicates that firms operations are affected by exchange rates, especially
when their input and output prices are influenced by currency movements. This suggest that Australian firms are
sensitive to foreign exchange rate fluctuations which shocks the profit level figures and consequently effects
profit distribution as cash dividends, on-market share repurchase and total dividends. Results also shows that the
greater the foreign exchange risk exposure the more it will have negative impact on dividend distributions. The
regression analysis of on-market share repurchase activities presents some instinctive results for Australian
firms. Negative significant coefficient of foreign exchange risk exposure (t=-1.67) indicate that when the foreign
exchange risk exposure is high, it leads a reduction in on-market share repurchase activities. This may imply
that shareholders may become sceptical about the true price of the share and as a result their participation in on-
market share repurchases declines.
Long term debt has significant negative (t=-1.53, t=-2.93 and t=-2.95) relationship with off-market, on-market
share repurchase and special cash types of dividend payments. This may indicate that when firms are engaged in
raising long term debt, the firm significantly reduce their both type of share repurchase activities as well as
special cash dividend payments. Alternatively, it may also imply that share repurchase financed through
external borrowing may be costly and therefore we observe this significant negative impact in explaining
variation in both off-market and on-market share repurchase.
Although it has been argued in the literature that dividend payout can be seen as a technique to reduce agency
costs by distributing cash in hand (Easterbrook, 1984 and Jensen, 1986), the results in this paper produce an
opposite outcome to this argument. The significant negative result of cash availability may imply that, for
Australian firms, an increase in cash in hand may not help in reducing dividend related agency costs. This
29
indicates that managers may involve themselves in increasing their wealth at the costs of shareholders when it
comes to a point of making any form of dividend payments (t=-5.69, t=-2.31, t=-2.67, t=-6.26 and t=-8.62). This
finding may support the results found by Jensen and Meckling (1976).
A significant negative coefficient of collateral value of asset and its negative impact on various forms of
dividend payments can be explained from bondholder and shareholders related agency costs point of view. For
example, if there is not enough cash available to distribute regular cash dividends, managers may rely on
external financing to meet the dividend payment obligation. This action may impose a strenuous impact on the
collateral assets, leading to create a significant negative relationship across all six modes of dividend payments
(t=-5.33, t=-1.67, t=-1.98, t=-2.78, t=-6.25 and t=-7.86).
Earnings variation is captured through standard deviation of stock return. This coefficient has significant
negative association across all six different types of dividend payments (t=-7.24, t=-2.46, t=-2.73, t=-2.47, t=-
6.70 and t=-12.36). This result is consistent with the argument of firms facing high levels of earnings volatility
are likely to pay low dividends (Asquith and Mullins (1983); Miller and Rock (1985) and Brav et al. (2005)).
This result is also consistent with recent findings of Glen et al. (1995), and Baker et al. (2001) among others. A
negative significant relationship of stock return variation with off-market and on-market share repurchase type of
dividend payments implying that when a firms market performance becomes volatile, there will be a significant
reduction in share repurchase activities.
A strong positive relationship is observed with size variable and most of the dividend payment methods (t=6.20,
t=3.37, t=-4.16, 6.93 and t=8.40) except special cash dividends. This finding supports the arguments that as firms
become larger, they have greater access to capital markets and they can easily able to switch between debt and
equity and take advantage of lower transaction costs which in turn allows for more stable and possibly higher
dividend payments (Lloyd et al. (1985); Ali et al. (1993); Vogt (1994)).
Firms age can be a sign of firms maturity. The age coefficient shows a significant positive (t=1.79, t=1.70 and
t=2.46) relationship in explaining off-market share buy back and special cash dividends. This result may suggest
30
that as Australian firms mature, they tend to increase off-market type share repurchase activities and increase
special cash form of dividend payments.
Market to book-value has significant positive relationship (t=2.20) with on-market share repurchase. From
signalling theorys perspective, this may indicate that on-market share repurchase activities have positive
information content. For example, this result may show a supports for the signalling hypothesis argument that
management by repurchasing their own shares, they signal to the market that their shares are undervalued and
they have inside information supporting the higher value of their outstanding shares.
Overall, the significance of the regression model appears moderately significant (eg., the adjusted R-square
ranging between 25% to 35%) across various types of dividend payments. Also, the estimated coefficients
discussed above are obtained after controlling for time and industry effects.
Table 6
Dividend payment determinants across various dividend payout measurements and impact of multinationality
Following model is used to achieve the results:
*
, 0 1 2 , 1 3 , 1 4 , 1
5 , 1 6
- 2
i t i t i t i t
i t
DIV Multinationality Political risk Foreign Exchange risk Geographical diversification
Industrial diversification digit Industrial diversificati
| | | | |
| |
= + + + +
+ +
, 1 7 , 1
8 , 1 9 , 1 10 , 1 11 , 1
12 , 1 13 , 1 14 , 1
- 4
i t i t
i t i t i t i t
i t i t i t
on digit Effective tax rate
Long term debt Cash Collateral value of asset Risk
Profitability Size Age
|
| | | |
| | | |
+
+ + + +
+ + + +
15 , 1 ,
- -
i t i t
Market to book value c
+
Cash
dividend
Off-
market
On-
market
Special
cash
Total
dividend
Net
dividend
Coeff t-stat Coeff t-stat Coeff t-stat Coeff t-stat Coeff t-stat Coeff t-stat
C 0.32 1.61 -0.21 -1.06 -1.30 -1.58 0.00 0.02 0.44 1.95
c
0.48 1.14
MULT -0.07 -1.96
b
-0.03 -0.81 -0.04 -0.86 -0.09 -2.50
b
-0.08 -2.03
b
-0.04 -2.41
b
PR 0.00 2.89
a
0.00 1.04 0.00 1.52 0.00 1.41 0.00 2.35
b
0.00 2.00
b
FX -0.08 -1.98
b
0.01 0.82 -0.04 -1.67
c
-0.01 -1.00 -0.11 -2.36
b
-0.01 -0.72
G_DIVER -0.02 -1.27 0.01 0.65 0.01 0.36 0.05 1.36 -0.01 -0.63 0.00 -0.40
I_2_DIGIT 0.14 0.92 0.11 0.69 1.25 2.04
b
0.17 1.42 0.11 0.65 0.08 0.72
I_4_DIGIT -0.03 -0.25 -0.04 -0.82 -0.08 -1.03 -0.12 -1.80
c
-0.04 -0.35 -0.10 -1.33
ETR 0.00 0.42 0.00 -0.65 0.00 -0.22 0.00 -1.02 0.00 0.33 0.00 0.43
LTD -0.01 -0.22 -0.04 -2.53
b
-0.06 -2.93
a
-0.04 -2.95
a
-0.02 -0.62 0.02 0.89
CASH -0.76 -5.69
a
-0.06 -0.84 -0.24 -2.31
b
-0.32 -2.67
a
-0.86 -6.26
a
-0.57 -8.62
a
CVA -0.41 -5.33
a
-0.10 -1.67
c
-0.17 -1.98
b
-0.17 -2.78
a
-0.52 -6.25
a
-0.32 -7.86
a
RISK -3.30 -7.24
a
-0.75 -2.46
b
-0.75 -2.73
a
-1.00 -2.47
b
-3.37 -6.70
a
-3.08 -12.36
a
PROF 0.00 0.94 0.00 1.46 0.00 0.97 0.00 0.71 0.00 0.58 0.00 1.92
c
SIZE 0.07 6.20
a
0.05 3.37
a
0.06 4.16
a
0.01 1.15 0.08 6.93
a
0.05 8.40
a
AGE 0.03 1.62 0.02 1.70
c
0.01 0.56 0.04 2.46
b
0.01 0.40 0.01 0.76
MB 0.00 -0.51 0.01 0.84 0.02 2.20
b
0.00 0.60 0.00 0.28 0.01 3.12
a
Industry effect Yes Yes Yes Yes Yes Yes
Time effect Yes Yes Yes Yes Yes Yes
31
Adj R-sqr 0.33 0.29 0.25 0.28 0.34 0.35
No. Of obs 2749 2749 2749 2749 2749 2749
The ordinary least square regression is conducted using full sample of 2749 of which 973 are MCs and the remaining being MCs (1776).
The dependent variable DIV takes six different dividend payment measurements. For example, regular cash dividend is defined as
regular cash to net income; off-market is calculated as the total amount spent on off-market share repurchase in the entire financial year
scaled by on-market is calculated as total amount spent on on-market share buyback for the financial year scaled by net income; and total
dividend is calculated as sum of regular dividends, off-market share repurchase, on-market share repurchase amount for the financial year,
special cash dividends, bonus share plan, special cash dividends and scaled by net income and finally net dividend I calculated as total
dividends minus new equity issue (via dividend reinvestment plans, right issue, public issues or private placements). The independent
variables are: Multinationality - this effect is measured where it takes a value of 1 when a corporation is a multinational otherwise it is 0.
It takes a place of unity (1) if a firm has foreign sales, foreign assets and at least two number countries involvement at any given year,
otherwise it is coded Zero (0) to represent domestic corporations. Political risk is the sum of all the MCs subsidiaries countries political
risk ratings exposed to the proportion of each sale that a subsidiary makes overseas. Foreign exchange risk FX is proxied by regression
coefficient of trade weighted index. The regression is performed on every firms weekly (52 observations per year) against all ordinaries
index and trade weighted index. Geographical diversification is measured as ln(Foreign sales proportion times by total number of
subsidiaries across countries). Industry level diversification is measured as 1 minus the Harfindahl index and this procedure is followed
for both two digit GICS code industry level diversification and four digit GICS codes industry level diversification. Effective tax rate is
measured as tax paid scaled by pretax income. Leverage is measured as the total debt to total debt and market value of equity. Leverage
is measured as the total debt to total debt and market value of equity. Cash is estimated as proportion of cash to total assets. Collateral
value of asset is measured as fixed asset to total assets. Risk is measured as standard deviation of firms stock return over a year using
weekly observations. Profitability is measured as net income over total assets. . Size is calculated as ln(total asset). Firms age is the
natural logarithm of the age of the firm in years from date of incorporation. Market-to-book is sum of market value of
equity and book value of equity scaled by book value of total assets. Mult* indicates slope variables for multinational
corporations for each independent variables. Note: a, b and c represents significance level of 1%, 5% and 10% for two tailed test.
4.2.2 The slope difference of determinant factors that explains the difference of dividend payout
ratios across MCs and DCs
Table 7 is an extension analysis of Table 6. The extension of the analysis is to identify the explanatory factors
that are liable in explaining the difference between MCs and DCs various forms of dividend payments.
The slope difference indicates that the interaction variable of effective tax rate and profitability have significant
negative relationship with regular cash dividend payments (t=-2.47 and -1.92, respectively). The negative
significant interaction slope variable of effective tax rate indicates that Australian MCs shareholders are not in
as good position as DCs shareholders to benefit from the dividend imputation tax credit. The resident
shareholders of Australian MCs are worse off in receiving cash dividends since they miss out in claiming tax
credit on the tax payments made in overseas countries. This result is consistent with the argument that
Australian MCs tax expense payment in the overseas countries cannot be part of the tax credit. As a result an
increase in the proportion of tax to its pre-tax income for MCs provide less benefit to its shareholders and
consequently it leads MCs to pay significantly less dividends to its shareholders in comparison to DCs. This
finding is very important and this supports the true benefit of how the dividend imputation tax system operates.
32
Further, given 97% of the sample MCs subsidiaries are located in classical tax countries, and earning profit
from those countries are less useful to the shareholders because the dividends that are paid out of those profit has
no tax credit components to it. Negative significant effective tax rate and profitability is also observed for
Australian Multinationals in payment of special cash dividend, total dividends and net dividend (t=-1.74 and t=-
1.98; t=-2.52 and t=-1.95; and t=-2.58 and t=-2.37). Further, the finding of this tax implication on dividends is
reliable because all the sample companies incorporated in this study pay fully franked dividends which means
the tax credit argument that has been used to justify results are valid.
The negative significant interaction variable of profitability implies that the Australian MCs receiving higher
profit than DCs has significantly negative impact on regular cash dividends, special cash dividends, total
dividends and net dividends. This finding is consistent with the effective tax rate arguments discussed above.
This result may suggest that from MCs point of view, receiving higher profit from overseas subsidiaries do not
add any additional benefit to attract shareholders because the tax that MCs subsidiaries pay in overseas countries
cannot be claimed as a tax credit by its shareholders. As a result, Australian MCs pay significantly lower
dividends to its shareholders relative to DCs counterparts.
Interestingly, no significant slope difference is found in explaining the variation of off-market share buy back
between MCs and DCs. However, for on-market share repurchase, a number of slope estimates became
significant. For example, geographical diversification (t=-1.98), industrial diversification (t=3.51) and size
(t=2.07). These results indicate that Australian MCs geographical expansions can significantly reduce their on-
market share repurchase activities relative to DCs counterparts. This may imply that Australian MCs find it
costly to involve in on-market share repurchase activities as they become more geographically dispersed relative
to DCs. Industrial diversifications- especially 2 digit level GICS, however, produce an opposite result for
Australian MCs. It shows that Australian MCs benefit in the 2-digit GICS industrial dispersion which assist
them to involve more in on-market type share repurchase activities in comparison to DCs. Also, Australian MCs
are significantly larger than DCs which also aids to increase in on-market share buy back activities. Lastly,
political risk factor explains the difference of MCs and DCs total dividend payments. The positive significant
33
slope estimate of political risk factor (t=2.03) implies that foreign subsidiaries sales earnings coming from safer
foreign countries helps Australian MCs to pay significantly higher total dividend relative to DCs. Finally, the
adjusted R-square across six different measurement of dividend payment shows a plausible fit of the regression
coefficient analysis.
Table 7
Interaction effects in dividend payout decision for Multinational corporations
Following model is used to achieve the results:
*
, 0 1 , 2 , 1 3 , 1 4 , 1
5 , 1 6
- 2
i t i t i t i t i t
i t
DIV Multinationality Political risk Foreign Exchange risk Geographical diversification
Industrial diversification digit Industrial diversific
| | | | |
| |
= + + + +
+ +
, 1 7 , 1
8 , 1 9 , 1 10 , 1 11 , 1
12 , 1 14 , 1 15 ,
- 4
Pr
i t i t
i t i t i t i t
i t i t i t
ation digit Effective tax rate
Long term debt Cash Collateral value of asset Risk
ofitability Size Age
|
| | | |
| | |
+
+ + + +
+ + +
1 16 , 1 17 , , 1
18 , , 1 19 , , 1 20 ,
- - *
* * * - 2
i t i t i t
i t i t i t i t i t
Market to book value Mult Political risk
Mult Foreign Exchange risk Mult Geographical diversification Mult Industrial diversification
| |
| | |
+ +
+ + +
, 1
21 , , 1 22 , , 1 23 , , 1
24 , , 1 25 ,
** - 4 * *
* *
i t
i t i t i t i t i t i t
i t i t i t
digit
Mult Industrial diversification digit Mult Effective tax rate Mult Long term debt
Mult Cash Mult Collateral
| | |
| |
+ + +
+ +
, 1 26 , , 1
27 , , 1 28 , , 1 29 , , 1 30 , , 1 ,
*
* * * * - -
i t i t i t
i t i t i t i t i t i t i t i t i t
value of asset Mult Risk
Mult Profitability Mult Size Mult Age Mult Market to book value
|
| | | | c
+
+ + + + +
Cash
dividend
Off-
market
On-
market
Special
cash
Total
dividend
Net
dividend
Coeff t-stat Coeff t-stat Coeff t-stat Coeff t-stat Coeff t-stat Coeff t-stat
C 0.06 0.18 -0.57 -1.46 0.61 0.77 -0.25 -1.26 0.15 0.40 0.32 1.85
c
MULT 0.27 0.66 0.59 0.72 -4.70 -3.52
a
0.28 0.98 0.27 0.57 0.15 0.65
PR 0.00 2.94
a
0.00 1.88
c
0.00 2.04
b
0.00 2.64
a
0.00 3.41
a
0.00 2.38
b
FX -0.09 -1.14 0.02 0.94 -0.02 -0.69 -0.01 -0.54 -0.10 -1.14 -0.01 -0.18
G_DIVER 0.06 0.72 -0.13 -1.34 0.44 2.02
b
-0.07 -2.15
b
0.08 0.92 0.05 1.46
I_2_DIGIT 0.13 0.56 0.27 1.04 -0.44 -0.60 0.34 1.77
c
0.09 0.32 -0.08 -0.51
I_4_DIGIT 0.04 0.19 -0.10 -1.51 -0.06 -0.80 -0.18 -1.20 0.00 -0.02 0.06 0.58
ETR 0.08 2.40
a
0.01 1.48 0.01 1.20 0.01 1.60 0.09 2.42
b
0.04 2.61
a
LTD 0.01 0.13 -0.04 -1.32 -0.05 -1.25 -0.04 -2.23
b
-0.01 -0.21 0.01 0.27
CASH -0.74 -2.68
a
-0.12 -1.45 -0.37 -1.48 -0.34 -2.57
a
-0.96 -3.70
a
-0.59 -5.61
a
CVA -0.53 -4.50
a
0.00 0.00 -0.27 -1.35 -0.27 -2.02
b
-0.64 -5.10
a
-0.33 -5.56
a
RISK -2.77 -4.44
a
-0.31 -1.13 -0.91 -1.81
c
-0.77 -1.89
c
-2.71 -3.97
a
-2.78 -8.28
a
PROF 0.02 1.93
b
0.00 1.09 0.00 1.61 0.00 1.73
c
0.01 1.95
c
0.00 2.51
b
SIZE 0.08 4.52
a
0.06 2.03
b
0.02 1.14 0.04 3.64
a
0.10 4.83
a
0.05 5.92
a
AGE 0.03 1.17 0.02 1.14 -0.01 -0.47 0.03 1.67
c
0.00 0.10 0.01 0.73
MB 0.00 0.01 0.02 1.78
c
0.01 0.67 0.00 0.30 0.02 1.13 0.02 2.88
a
M*PR 0.00 1.33 0.00 1.04 0.00 0.40 0.00 1.05 0.00 2.03
b
0.00 1.36
M*FX 0.04 0.40 -0.01 -0.47 -0.02 -0.50 0.00 -0.02 -0.01 -0.09 -0.01 -0.18
M*G_DIVER -0.07 -0.94 0.14 1.40 -0.43 -1.98
b
0.12 2.31
c
-0.09 -1.07 -0.06 -1.56
M*I_2_DIGIT 0.07 0.22 -0.36 -0.47 4.27 3.51
a
-0.25 -0.90 0.13 0.33 0.25 1.22
M*I_4_DIGIT -0.14 -0.55 0.12 1.23 -0.06 -0.52 0.07 0.45 -0.09 -0.30 -0.22 -1.58
M*ETR -0.09 -2.47
b
-0.01 -1.60 -0.01 -1.35 -0.02 -1.74
c
-0.09 -2.52
b
-0.04 -2.58
a
M*LTD -0.02 -0.32 -0.01 -0.19 -0.04 -0.82 -0.02 -0.54 -0.02 -0.35 0.01 0.45
M*CASH 0.02 0.05 0.10 0.81 0.20 0.75 0.04 0.20 0.20 0.67 0.03 0.20
M*CVA 0.25 1.54 -0.15 -1.25 0.16 0.77 0.18 1.26 0.23 1.35 0.02 0.27
M*RISK -0.67 -0.72 -0.70 -1.23 0.30 0.53 -0.30 -0.38 -0.83 -0.81 -0.43 -0.87
M*PROF -0.02 -1.92
c
0.00 -0.75 0.00 -1.39 0.00 -1.98
b
-0.01 -1.95
c
0.00 -2.37
b
34
M*SIZE -0.02 -0.81 -0.02 -0.61 0.06 2.07
a
-0.04 -1.61 -0.02 -0.84 -0.01 -0.77
M*AGE -0.02 -0.52 0.00 0.16 0.02 0.67 0.01 0.41 0.00 0.06 -0.01 -0.47
M*MB 0.00 -0.26 -0.02 -1.41 0.01 0.38 0.00 -0.11 -0.02 -1.19 -0.01 -1.17
Industry effect Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Time effect Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Adj R-sqr 0.19 0.17 0.21 0.12 0.24 0.26
No. Of obs 2749 2749 2749 2749 2749 2749
The ordinary least square regression is conducted using full sample of 2749 of which 973 are MCs and the remaining being DCs (1776).
The dependent variable DIV takes six different dividend payment measurements. For example, regular cash dividend is defined as
regular cash to net income; off-market is calculated as the total amount spent on off-market share repurchase in the entire financial year
scaled by on-market is calculated as total amount spent on on-market share buyback for the financial year scaled by net income; and total
dividend is calculated as sum of regular dividends, off-market share repurchase, on-market share repurchase amount for the financial year,
special cash dividends, bonus share plan, special cash dividends and scaled by net income and finally net dividend I calculated as total
dividends minus new equity issue (via dividend reinvestment plans, right issue, public issues or private placements). The independent
variables are: Multinationality - this effect is measured where it takes a value of 1 when a corporation is a multinational otherwise it is 0.
It takes a place of unity (1) if a firm has foreign sales, foreign assets and at least two number countries involvement at any given year,
otherwise it is coded Zero (0) to represent domestic corporations. Political risk is the sum of all the MCs subsidiaries countries political
risk ratings exposed to the proportion of each sale that a subsidiary makes overseas. Foreign exchange risk FX is proxied by regression
coefficient of trade weighted index. The regression is performed on every firms weekly (52 observations per year) against all ordinaries
index and trade weighted index. Geographical diversification is measured as ln(Foreign sales proportion times by total number of
subsidiaries across countries). Industry level diversification is measured as 1 minus the Harfindahl index and this procedure is followed
for both two digit GICS code industry level diversification and four digit GICS codes industry level diversification. Effective tax rate is
measured as tax paid scaled by pretax income. Leverage is measured as the total debt to total debt and market value of equity. Leverage
is measured as the total debt to total debt and market value of equity. Cash is estimated as proportion of cash to total assets. Collateral
value of asset is measured as fixed asset to total assets. Risk is measured as standard deviation of firms stock return over a year using
weekly observations. Profitability is measured as net income over total assets. Size is calculated as ln(total asset). Firms age is the
natural logarithm of the age of the firm in years from date of incorporation. Market-to-book is sum of market value of equity and book
value of equity scaled by book value of total assets. Mult* indicates slope variables for multinational corporations for each independent
variables. Note: a, b and c represents significance level of 1%, 5% and 10% for two tailed test.
4.2.3 Is there a curvilinear relationship between firms international involvement and dividend payout
ratios?
Table 8 presents results for non-linear relationship across various dividend payments and the international
factors. This non-linear relationship indicates that there is an optimal point where holding more assets in
overseas does not provide any additional benefit to the firms to increase their dividends payments. This could be
due to additional risk exposure relating to firms expansion in overseas countries. Also, over-time the benefit is
reduced due to global integration which minimises the benefit of diversification. To capture this effect, three
additional variables are incorporated in the original model and they are foreign sales ratio, foreign asset ratio
and total subsidiaries and their squared terms accordingly. This result presented in Table 8 and reveals some
insights about Australian firms. Interestingly, firms holding higher proportion of assets, sales and increasing
number of foreign subsidiaries have no significant effect in most modes of dividend payments except special
cash and net dividend payments. Results shows that the increase in proportion of assets holding in foreign
35
countries decreases special cash dividend payment significantly (t=-1.66), however, there is an optimal level
where increase in holding assets in foreign countries will no longer be detrimental instead it would assist
significantly to increase special cash dividend payments. This is evidenced with the positive significant squared
term foreign asset ratio (t=2.00). Interestingly, un-squared terms of foreign sales ratio and total subsidiary
demonstrate significant positive impact on net payment decision (t=2.00 and t=2.16, respectively) while the
squared term foreign sales ratio and total subsidiary squared terms show significant negative relationship with
net dividend payments (t=-2.67 and t=-2.19, respectively). This result implies that as the foreign sales and
number of total subsidiary increase, it significantly raises the net dividend payment up to a point and then it
reduces the net dividend payment of dividends. This relationship is evidenced with the significant negative total
subsidiary squared term.
Table 8
Extent of international involvement and its impact on various dividend payout policies accounting for
multinationality
Following model is used to achieve the results:
*
, 0 1 2 , 1 3 , 1 4 , 1
5 , 1 6
- 2
i t i t i t i t
i t
DIV Multinationality Political risk Foreign Exchange risk Geographical diversification
Industrial diversification digit Industrial diversificati
| | | | |
| |
= + + + +
+ +
, 1 7 , 1
8 , 1 9 , 1 10 , 1 11 , 1 12 , 1
13 , 1 14 , 1
- 4
i t i t
i t i t i t i t i t
i t i t
on digit Effective tax rate
Long term debt Cash Collateral value of asset Risk Profitability
Size Age
|
| | | | |
| |
+
+ + + + +
+ + + +
15 , 1 16 , 1 17 , 1
2 2
18 , 1 19 , 1 20 , 1
2
- -
( ) ( )
i t i t i t
i t i t i t
Market to book value foriegn sales ratio foriegn asset ratio
Total subsidiary foriegn sales ratio foriegn asset ratio
| | |
| | |
|
+ +
+ + +
+
2
1 , 1 ,
( )
i t i t
Total subsidiary c
+
Cash
dividends
Off
market
On
market
Special
cash
Total
dividends
Net
dividends
Coeff t-stat Coeff t-stat Coeff t-stat Coeff t-stat Coeff t-stat Coeff t-stat
C 0.30 1.51 -0.27 -1.31 -1.44 -1.98
b
-0.12 -0.79 0.43 1.90
c
0.48 4.04
a
MULT -0.07 -0.92 -0.03 -0.68 0.00 0.06 -0.02 -0.52 -0.04 -0.56 -0.06 -2.05
b
PR 0.00 3.16
c
0.00 0.88 0.00 1.31 0.00 1.60 0.00 2.61
c
0.00 2.25
b
FX -0.08 -2.03
b
0.02 1.12 -0.04 -1.51 -0.01 -0.63 -0.11 -2.39
c
-0.01 -0.67
G_DIVER 0.01 0.28 0.00 0.01 0.02 0.54 0.05 0.71 0.03 0.59 0.03 0.87
I_2_DIGIT 0.16 0.98 0.11 0.67 1.34 1.98 0.19 1.56 0.12 0.69 0.09 0.87
I_4_DIGIT -0.09 -0.69 -0.04 -0.71 -0.06 -0.74 -0.12 -1.52 -0.11 -0.78 -0.15 -2.00
b
ETR 0.00 0.39 0.00 -0.24 0.00 -0.32 0.00 -0.23 0.00 0.27 0.00 0.44
LTD -0.01 -0.45 -0.06 -3.47
a
-0.08 -3.93
b
-0.06 -3.04
a
-0.04 -1.10 0.01 0.61
CASH -0.77 -5.70
a
-0.04 -0.55 -0.24 -2.09
b
-0.31 -2.83
a
-0.88 -6.27
c
-0.57 -8.52
a
CVA -0.43 -5.58
a
-0.10 -1.48 -0.19 -1.86
c
-0.14 -1.82
c
-0.54 -6.52
c
-0.32 -7.75
a
RISK -3.27 -7.23
a
-0.74 -2.61
a
-0.83 -2.64
a
-1.31 -2.40
b
-3.38 -6.73
c
-3.07 -11.90
a
PROF 0.00 0.78 0.00 1.05 0.00 0.94 0.00 -0.62 0.00 0.34 0.00 1.52
SIZE 0.07 6.34
a
0.05 3.45
a
0.07 4.19
a
0.01 0.79 0.09 6.92 0.05 8.51
a
AGE 0.03 2.04
b
0.02 1.82
c
0.01 0.75 0.04 2.38
b
0.01 0.76 0.00 0.50
36
MB 0.00 -0.40 0.01 0.90 0.02 2.21
b
0.00 0.81 0.00 0.24 0.01 2.99
a
FRGN ASSET -0.10 -0.45 -0.08 -0.43 -0.47 -1.55 -0.50 -1.66
c
-0.25 -0.93 -0.09 -0.79
FRGN SALES 0.05 0.25 -0.30 -1.35 -0.30 -1.22 -0.64 -1.42 -0.15 -0.61 0.11 2.00
b
TOTAL SUB 0.02 0.45 0.04 1.40 0.04 0.75 0.10 1.19 0.03 0.56 0.03 2.16
b
(FRGN ASSET)
2
0.14 0.61 0.03 0.19 0.38 1.54 0.55 2.00
b
0.26 0.97 0.07 0.57
(FRGN SALES)
2
-0.21 -0.91 0.37 1.32 0.34 1.29 0.44 1.28 0.01 0.03 -0.21 -1.67
c
(TOTAL SUB)
2
-0.01 -1.18 0.00 -0.47 0.00 -0.61 -0.01 -0.83 -0.01 -1.32 -0.01 -2.19
b
Industry effect Yes Yes Yes Yes Yes Yes
Time effect Yes Yes Yes Yes Yes Yes
Adj R - sqr 0.24 0.23 0.18 0.22 0.23 0.26
No. of obs 2749 2749 2749 2749 2749 2749
The ordinary least square regression is conducted using full sample of 2749 of which 973 are MCs and the remaining being MCs (1776).
The dependent variable DIV takes six different dividend payment measurements. For example, regular cash dividend is defined as
regular cash to net income; off-market is calculated as the total amount spent on off-market share repurchase in the entire financial year
scaled by on-market is calculated as total amount spent on on-market share buyback for the financial year scaled by net income; and total
dividend is calculated as sum of regular dividends, off-market share repurchase, on-market share repurchase amount for the financial year,
special cash dividends, bonus share plan, special cash dividends and scaled by net income and finally net dividend I calculated as total
dividends minus new equity issue (via dividend reinvestment plans, right issue, public issues or private placements). The independent
variables are: Multinationality - this effect is measured where it takes a value of 1 when a corporation is a multinational otherwise it is 0.
It takes a place of unity (1) if a firm has foreign sales, foreign assets and at least two number countries involvement at any given year,
otherwise it is coded Zero (0) to represent domestic corporations. Political risk is the sum of all the MCs subsidiaries countries political
risk ratings exposed to the proportion of each sale that a subsidiary makes overseas. Foreign exchange risk FX is proxied by regression
coefficient of trade weighted index. The regression is performed on every firms weekly (52 observations per year) against all ordinaries
index and trade weighted index. Geographical diversification is measured as ln(Foreign sales proportion times by total number of
subsidiaries across countries). Industry level diversification is measured as 1 minus the Harfindahl index and this procedure is followed
for both two digit GICS code industry level diversification and four digit GICS codes industry level diversification. Effective tax rate is
measured as tax paid scaled by pretax income. Leverage is measured as the total debt to total debt and market value of equity. Leverage
is measured as the total debt to total debt and market value of equity. Cash is estimated as proportion of cash to total assets. Collateral
value of asset is measured as fixed asset to total assets. Risk is measured as standard deviation of firms stock return over a year using
weekly observations. Profitability is measured as net income over total assets. Size is calculated as ln(total asset). Firms age is the
natural logarithm of the age of the firm in years from date of incorporation. Market-to-book is sum of market value of equity and book
value of equity scaled by book value of total assets. Foreign sales ratio is proportion of assets held in foreign countries to total assets
while foreign sales is the proportion of foreign sales to total sales and total number of subsidiaries is the sum of total number of
subsidiaries in domicile and foreign countries. Squared terms are the taken square of these variables. Note: a, b and c represents
significance level of 1%, 5% and 10% for two tailed test.
4.2.4 Determinants of dividend increase and dividend decrease across DCs and MCs?
Table 9 presents the determinants of dividend increasing behaviour and differentiates if Australian MCs increase
dividends significantly more relative to DCs by employing a logistic regression. Dividends decreasing effect is
not investigated instead dividends increase is tested here only because in the sample a large proportion
(approximately 85%) of the observations in the sample is comprised of dividend increasing activities. Also,
dividend payment increment is examined based on total dividend payments only since it requires substantial
amount of year by year data across various form of dividend payments and for this analysis total dividend met
this requirement. Result shows that the likelihood of Australian MCs in increasing total dividend payment is
significantly higher than DCs (z=3.76) and the significant factors that are significant to explain the probability of
37
dividend payment increase are geographical diversification (z=-1.97), stock return variation (z=-4.64), firms
size (z=1.79) and market-to-book value (z=2.91). Results also suggest that geographical diversification and risk
(stock return volatility) have significant less positive effect in explaining the event of dividend increase while
firms size and market-to-book representing future growth has more magnitude of significant positive impact to
describe probability of dividend increase. To investigate if Australian MCs have any significant difference in
the slope coefficient in explaining the probability of dividend increase, a number of coefficients became
significant. These variables are political risk (z=1.91), cash (z=1.85) and size (z=-1.71). This evidence indicates
that the indication of safer political risk ratings and availability of cash in hand provides much stronger support
for the difference of Australian MCs likelihood of dividend increase behaviour than the negative slope
coefficients of size to explain the difference between MCs and DCs dividend payment.
Table 9
Probit regression of dividend increase and slope difference of DCs and MCs
Following model is used to achieve the results:
, 0 1 , 2 , 1 3 , 1 4 , 1
5 , 1 6
- 2
i t i t i t i t i t
i t
Dividend Increase Multinationality Political risk Foreign Exchange risk Geographical diversification
Industrial diversification digit Industri
| | | | |
| |
= + + + +
+ +
, 1 7 , 1
8 , 1 9 , 1 10 , 1 11 , 1
12 , 1 14 ,
- 4
Pr
i t i t
i t i t i t i t
i t i t
al diversification digit Effective tax rate
Long term debt Cash Collateral value of asset Risk
ofitability Size
|
| | | |
| |
+
+ + + +
+ +
1 15 , 1 16 , 1 17 , , 1
18 , , 1 19 , , 1 20 ,
- - *
* * *
i t i t i t i t
i t i t i t i t i t
Age Market to book value Mult Political risk
Mult Foreign Exchange risk Mult Geographical diversification Mult Industrial diversi
| | |
| | |
+ + +
+ + +
, 1
21 , , 1 22 , , 1 23 , , 1
24 , , 1 25 ,
- 2
* - 4 * *
*
i t
i t i t i t i t i t i t
i t i t i t
fication digit
Mult Industrial diversification digit Mult Effective tax rate Mult Long term debt
Mult Cash Mult
| | |
| |
+ + +
+ +
, 1 26 , , 1
27 , , 1 28 , , 1 29 , , 1 30 , , 1 ,
* *
* * * * - -
i t i t i t
i t i t i t i t i t i t i t i t i t
Collateral value of asset Mult Risk
Mult Profitability Mult Size Mult Age Mult Market to book value
|
| | | | c
+
+ + + + +
Dividends increase Dividends Increase
Coeff z-stat Coeff z-stat
C -0.62 -1.06 -0.93 -1.29
MULT 0.35 3.76
a
0.06 0.70
PR 0.00 0.21 0.01 1.68
c
FX 0.01 0.05 0.02 0.05
G_DIVER -0.05 -1.99
b
-0.10 -0.46
I_2_DIGIT 0.28 0.44 1.05 0.65
I_4_DIGIT 0.39 0.87 0.32 1.89
c
ETR 0.05 0.96 0.12 0.99
LTD -0.02 -0.32 -0.10 -0.60
CASH 0.51 1.19 0.41 0.19
CVA 0.12 0.58 0.05 0.10
RISK -0.03 -4.64
a
-0.22 -1.89
c
PROF 0.01 -1.02 -0.01 -1.63
SIZE 0.05 1.79
c
0.20 2.51
b
AGE 0.04 1.00 0.11 1.09
38
MB 0.06 2.91
a
0.12 2.06
b
M*PR 0.02 1.91
c
M*FX -0.01 -0.02
M*G_DIVER 0.00 0.00
M*I_2_DIGIT -0.26 -1.08
M*I_4_DIGIT -0.41 -1.52
M*ETR 0.07 0.39
M*LTD 0.08 0.35
M*CASH 1.17 1.85
c
M*CVA 0.24 0.36
M*RISK -0.66 -0.03
M*PROF 0.01 1.47
M*SIZE -0.17 -1.71
c
M*AGE -0.10 -0.74
M*MB -0.02 -0.21
R square 0.29 0.30
No. of obs 2245 2245
The Probit regression is conducted using full sample of 2749 of which 973 are MCs and the remaining being MCs (1776). The dependent
variable Dividend increase is identified as 1 in year t if a firm increased total dividends from year t-1 to t, 0 otherwise. The independent
variables are: Multinationality - this effect is measured where it takes a value of 1 when a corporation is a multinational otherwise it is 0.
It takes a place of unity (1) if a firm has foreign sales, foreign assets and at least two number countries involvement at any given year,
otherwise it is coded Zero (0) to represent domestic corporations. Political risk is the sum of all the MCs subsidiaries countries political
risk ratings exposed to the proportion of each sale that a subsidiary makes overseas. Foreign exchange risk FX is proxied by regression
coefficient of trade weighted index. The regression is performed on every firms weekly (52 observations per year) against all ordinaries
index and trade weighted index. Geographical diversification is measured as ln(Foreign sales proportion times by total number of
subsidiaries across countries). Industry level diversification is measured as 1 minus the Harfindahl index and this procedure is followed
for both two digit GICS code industry level diversification and four digit GICS codes industry level diversification. Effective tax rate is
measured as tax paid scaled by pretax income. Leverage is measured as the total debt to total debt and market value of equity. Leverage
is measured as the total debt to total debt and market value of equity. CASH is estimated as proportion of cash to total assets. Collateral
value of asset is measured as fixed asset to total assets. Risk is measured as standard deviation of firms stock return over a year using
weekly observations. Profitability is measured as net income over total assets. . Size is calculated as ln(total asset). Firms age is the
natural logarithm of the age of the firm in years from date of incorporation. Market-to-book is sum of market value of equity and book
value of equity scaled by book value of total assets. Mult* indicates slope variables for multinational corporations for each independent
variables. Note: a, b and c represents significance level of 1%, 5% and 10% for two tailed test.
4.2.5 What determines to pay or not to pay dividends across DCs and MCs?
Table 10 summarises probit regressions that document the effects of the chosen international and firm specific
factors on the likelihood that a firm pays dividends. Results show that Australian MCs are significantly less
likely to pay regular cash dividends, total dividends and net dividends relative to their domestic counterparts
DCs (z=-3.12, z=-4.42 and z=-3.35). Interestingly, multinationality does not appear to be significant in
explaining the likelihood of paying Off-market share repurchase and on-market share repurchase types of
dividends regressions.
The regression results (without slope difference) show that high ratings of political risk (indication of country
being safe to operate in) (z=3.83), geographical diversification (z=3.08) and industry diversification (especially
39
firms falls under the 2 digit GICS codes category) (z=2.04), larger firm size (z=11.10), firms maturity (z=5.51),
firms being profitable and firms experiencing high future growth (z=2.05) are more likely to pay total dividends.
These findings are consistent with Fama and French (1999 and 2001). In contrast, firms that have high level of
cash in hand, more collateral value of assets in hand and have high stock return variation are less likely to pay
total dividends and these evidence is supported by high statistical negative test statistics (z=-8.40, -8.03 and -
3.34 respectively). All these results are consistent with pecking order argument in which firms are reluctant to
issue risky securities because of asymmetric information problems (Myers and Majluf, (1984); Myers (1984)) or
simply because higher transaction costs. Greater asymmetric information problems and higher costs when
issuing securities can also explain why small firms are less likely to pay dividends.
Table 10 also reports results of determinants that explain the slope difference of MCs and DCs likeliness of
dividend payment behaviour. Interestingly, slope difference coefficients to explain Australian MCs likelihood
of regular cash dividend payments cannot be explained with any suggested explanatory factors. However, the
existence of less likelihood of Australian MCs payment of total dividend payments and net dividend payments in
comparison to DCs is explained by too much exposure of facing foreign exchange risk (z=-2.75 and z=-2.25)
and inconvenience of not being able to claim tax credit benefit (z=-1.91 an z=-2.75). The interaction variables
capture this effect and the results indicate that Australian MCs are less likely to make dividend payment decision
(relative to its counter part DCs) due to fear of too much exchange rate exposure and MCs paying taxes on their
income in majority of the non-imputation countries becomes costly to make total and net dividend payment
decisions. Lastly, we conduct a range of robustness tests and the initial results are found insensitive.
26
26
The proposed model has also been applied using all the suggested independent variables on a contemporaneous basis and the results are
almost 95% similar to the lag presented results. Also, it is worth noting that it hardly makes any difference in the Adjusted R
2
and the
individual coefficient when dependent variable is scaled by total asset and earnings before interest depreciation and amortisation. Further,
some alternative measurements have also been tested in the original regression and results remain insensitive.
40
Table 10
Probit regressions to explain which DCs and MCs pay dividends
Following model is used to achieve the results:
, 0 1 , 2 , 1 3 , 1 4 , 1
5 , 1 6
- 2
i t i t i t i t i t
i t
D i v i d e n d P a y e r M u l t i n a t i o n a l i t y P o l i t i c a l r i s k F o r e i g n E x c h a n g e r i s k G e o g r a p h i c a l d i v e r s i f i c a t i o n
I n d u s t r i a l d i v e r s i f i c a t i o n d i g i t I n d u s t r i a l
| | | | |
| |
= + + + +
+ +
, 1 7 , 1
8 , 1 9 , 1 1 0 , 1 1 1 , 1
1 2 , 1 1 4 , 1
- 4
P r
i t i t
i t i t i t i t
i t i t
d i v e r s i f i c a t i o n d i g i t E f f e c t i v e t a x r a t e
L o n g t e r m d e b t C a s h C o l l a t e r a l v a l u e o f a s s e t R i s k
o f i t a b i l i t y S i z e
|
| | | |
| |
+
+ + + +
+ + +
1 5 , 1 1 6 , 1 1 7 , , 1
1 8 , , 1 1 9 , , 1 2 0 ,
- - *
* * *
i t i t i t i t
i t i t i t i t i t
A g e M a r k e t t o b o o k v a l u e M u l t P o l i t i c a l r i s k
M u l t F o r e i g n E x c h a n g e r i s k M u l t G e o g r a p h i c a l d i v e r s i f i c a t i o n M u l t I n d u s t r i a l d i v e r s i f i c
| | |
| | |
+ +
+ + +
, 1
2 1 , , 1 2 2 , , 1 2 3 , , 1
2 4 , , 1 2 5 ,
- 2
* * - 4 * *
* *
i t
i t i t i t i t i t i t
i t i t i t
a t i o n d i g i t
M u l t I n d u s t r i a l d i v e r s i f i c a t i o n d i g i t M u l t E f f e c t i v e t a x r a t e M u l t L o n g t e r m d e b t
M u l t C a s h M u l t C
| | |
| |
+ + +
+ +
, 1 2 6 , , 1
2 7 , , 1 2 8 , , 1 2 9 , , 1 3 0 , , 1 ,
*
* * * * - -
i t i t i t
i t i t i t i t i t i t i t i t i t
o l l a t e r a l v a l u e o f a s s e t M u l t R i s k
M u l t P r o f i t a b i l i t y M u l t S i z e M u l t A g e M u l t M a r k e t t o b o o k v a l u e
|
| | | | c
+
+ + + + +
The Probit regression is conducted using full sample of 2749 of which 973 are MCs and the remaining being MCs (1776). The dependent variable Payer is identified as 1 in year t if a firm pays dividends, 0
otherwise. The independent variables are: Multinationality - this effect is measured where it takes a value of 1 when a corporation is a multinational otherwise it is 0. It takes a place of unity (1) if a firm has
foreign sales, foreign assets and at least two number countries involvement at any given year, otherwise it is coded Zero (0) to represent domestic corporations. Political risk is the sum of all the MCs
subsidiaries countries political risk ratings exposed to the proportion of each sale that a subsidiary makes overseas. Foreign exchange risk FX is proxied by regression coefficient of trade weighted index. The
regression is performed on every firms weekly (52 observations per year) against all ordinaries index and trade weighted index. Geographical diversification is measured as ln(Foreign sales proportion times
by total number of subsidiaries across countries). Industry level diversification is measured as 1 minus the Harfindahl index and this procedure is followed for both two digit GICS code industry level
diversification and four digit GICS codes industry level diversification. Effective tax rate is measured as tax paid scaled by pretax income. Leverage is measured as the total debt to total debt and market value
of equity. Leverage is measured as the total debt to total debt and market value of equity. Cash is estimated as proportion of cash to total assets. Collateral value of asset is measured as fixed asset to total
assets. Risk is measured as standard deviation of firms stock return over a year using weekly observations. Profitability is measured as net income over total assets. Size is calculated as ln(total asset).
Firms age is the natural logarithm of the age of the firm in years from date of incorporation. Market-to-book is sum of market value of equity and book value of equity scaled by book
value of total assets. Mult* indicates slope variables for multinational corporations for each independent variables. Note: a, b and c represents significance level of 1%, 5% and 10% for two tailed test.
41
Cash
Dividends
Off Market
Dividends
On Market
Dividends
Special
Dividends
Total
Dividends
Net
Dividends
Coeff z-stat Coeff z-stat Coeff z-stat Coeff z-stat Coeff z-stat Coeff z-stat Coeff z-stat Coeff z-stat Coeff z-stat Coeff z-stat Coeff z-stat Coeff z-stat
C 0.03 0.30 -0.19 -0.98 -0.081 -1.11 -0.04 -1.28 -0.73 -1.76
c
-0.44 -2.23
b
-0.11 -1.01 0.36 1.62 -0.20 -1.37 -0.84 -1.75
b
-0.23 -1.70
c
-0.07 -1.13
MULT -0.47 -3.12
a
2.10 1.02 0.06 0.19 -0.39 -1.08 0.02 0.04 3.96 0.84 -0.45 -1.58 -0.31 -1.13 -0.83 -4.42
b
1.70 0.73 -0.62 -3.35
a
2.12 0.86
PR 0.01 2.33
b
0.02 2.61
b
0.00 0.29 0.00 -0.06 0.01 0.65 0.00 0.03 -0.01 -0.78 0.00 0.13 0.02 3.83
a
0.02 3.16
a
0.01 2.94
a
0.01 2.00
b
FX -0.20 -1.11 -0.07 -0.21 -0.14 -0.28 -0.51 -0.73 -0.02 -0.04 0.44 0.40 -0.59 -1.64 -0.02 -1.32 0.14 0.62 0.38 0.99 0.05 0.22 0.12 0.37
G_DIVER 0.03 0.48 0.99 1.40 0.11 1.45 0.46 1.42 0.19 1.67 0.19 0.68 0.00 0.05 -0.03 -3.02
a
0.26 3.08
a
2.00 1.51 0.14 1.65
c
1.07 1.17
I_2_DIGIT 0.36 0.31 1.26 0.61 1.42 1.23 1.00 0.29 -1.39 -2.92
a
-0.80 -0.31 -3.55 -1.51 -0.39 -1.73
c
2.97 2.04
b
5.14 3.27
a
3.01 2.30
a
4.64 2.87
b
I_4_DIGIT -0.24 -0.33 0.11 0.07 0.31 0.13 1.81 0.54 0.76 2.08
b
0.24 0.08 2.60 1.10 0.01 0.15 -0.79 -1.04 -0.91 -0.93 -1.18 -1.91
b
-0.74 -0.81
ETR 0.01 0.32 -0.02 -0.18 -0.06 -0.93 0.15 0.97 -0.02 -0.49 0.29 1.10 0.02 0.99 0.01 1.49 -0.01 -0.49 0.11 0.75 -0.01 -0.59 0.08 0.58
LTD -0.35 -2.60
a
-0.33 -1.42 -0.22 -0.35 0.46 1.16 0.00 0.00 0.46 0.97 -0.24 -0.31 0.02 0.89 -0.18 -1.35 -0.20 -1.02 -0.05 -0.32 -0.22 -0.99
CASH -3.69 -6.73
a
-3.92 -4.62
a
0.59 0.48 0.08 1.11 -0.44 -0.18 -6.96 -0.64 -0.28 -0.23 0.02 0.30 -5.75 -8.40
a
-2.10 -5.66
a
-2.08 -8.06
a
-5.18 -5.13
a
CVA -2.56 -6.99
a
-2.94 -4.85
a
-0.88 -1.29 -0.28 -0.30 -0.45 -0.42 3.21 0.84 -2.10 -3.05
a
-0.07 -1.73
c
-3.71 -8.03
a
-4.09 -5.00
a
-3.32 -7.44
a
-3.58 -4.54
a
RISK -3.42 -11.75
a
-3.07 -7.29
a
-2.20 -3.44
a
-1.24 -1.76
c
-1.13 -1.96
c
-2.52 -1.23 -1.85 -1.33 -0.25 -1.37 -3.82 -3.34a -1.53 -6.26
a
-3.07 -1.14
a
-3.08 -7.33
a
PROF 0.00 -0.09 0.11 1.00 0.00 -2.57
b
0.00 -1.24 0.00 -1.66
c
-0.01 -1.20 0.00 -2.92
a
0.00 -1.53 0.00 2.39
b
0.01 1.06 0.00 1.13 0.01 1.04
SIZE 0.42 7.64
a
0.44 4.90
a
0.26 2.80
a
0.10 0.53 0.40 2.69
b
0.46 1.40 0.20 2.09
b
0.00 0.37 0.78 11.10
a
0.72 6.72
a
0.63 8.38
a
0.64 5.70
a
AGE 0.37 5.22
a
0.36 2.84
a
0.11 0.85 0.13 0.62 -0.24 -1.49 0.10 0.29 0.49 3.49
a
0.02 2.70
b
0.47 5.51
a
0.50 3.59
a
0.50 6.07
a
0.52 3.56
a
MB 0.14 3.61
a
0.14 2.45
b
0.08 1.19 0.20 1.93
c
-0.01 -0.07 -0.03 -0.12 0.15 1.89
c
0.01 2.11
b
0.09 2.05
b
0.07 1.05 0.14 3.30
a
0.13 2.01
b
M*PR -0.01 -1.32 0.00 0.23 0.01 0.41 0.00 -0.83 -0.01 -0.64 0.00 -0.03
M*FX -0.15 -0.36 0.56 0.57 -0.56 -0.43 0.01 0.60 -0.35 -2.75
a
-0.10 -2.25
b
M*G_DIVER -0.99 -1.39 -0.35 -1.04 0.03 0.09 0.02 2.57
b
-1.78 -1.34 -0.93 -1.02
M*I_2_DIGIT -1.21 -0.51 0.72 1.30 -0.07 -1.65
c
0.27 0.91 -3.77 -1.64 -2.52 -1.08
M*I_4_DIGIT -0.39 -0.21 -2.70 -0.64 0.80 1.74
c
0.07 0.62 0.53 0.36 -0.58 -0.48
M*ETR 0.03 0.25 -0.23 -1.29 -0.39 -1.36 -0.01 -1.45 -0.13 -1.91
c
-0.11 -2.75
b
M*LTD -0.04 -0.16 -1.96 -2.75
a
-1.21 -1.43 -0.05 -1.86
c
0.00 0.01 0.31 0.99
M*CASH 0.40 0.36 -0.52 -1.02 1.72 0.61 -0.05 -0.51 0.54 0.37 0.14 0.10
M*CVA 0.53 0.69 -0.78 -0.59 -1.76 -1.19 0.01 0.19 0.63 0.63 0.49 0.51
M*RISK -1.49 -0.38 -1.46 -0.76 1.05 0.21 0.28 1.12 0.12 0.70 0.53 0.52
M*PROF -0.12 -1.00 0.00 0.75 0.01 1.08 0.00 0.88 -0.01 -0.68 -0.01 -0.67
M*SIZE -0.02 -0.21 0.22 1.01 -0.09 -0.23 0.01 1.17 0.13 0.91 -0.01 -0.10
M*AGE 0.00 -0.02 0.02 0.07 -0.35 -0.89 -0.01 -0.53 -0.08 -0.43 -0.06 -0.34
M*MB 0.01 0.09 -0.24 -1.88
a
-0.02 -0.08 -0.01 -1.57 0.03 0.28 0.01 0.09
Industry effect Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Time effect Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
R-square 0.32 0.33 0.29 0.30 0.31 0.31 0.28 0.29 0.26 0.27 0.29 0.30
No. of obs 2749 2749 2749 2749 2749 2749 2749 2749 2749 2749 2749 2749
5. Conclusion
We demonstrate that international factors, for example multinationality, geographical diversification, political
risk and foreign exchange risks are essential to incorporate in determining dividend payout ratios. Particularly it
is evidenced that Australian MCs pay significantly less regular cash dividends, special dividends, total dividends
and net dividends relative to their counterpart DCs. After controlling for the multinationality effect, the political
risk factor is found to be extremely important in explaining regular cash dividends, total dividends and net
dividend payments. This result implies that firms tend to increase dividend payments when earnings are received
from safe overseas subsidiary countries. Foreign risk exposure is also found significant in explaining regular
cash dividends, on-market share repurchase and total dividends. This outcome indicates that Australian firms
operations are affected imperfectly by exchange rate movements which in turn shock profit figures and lead to
pay less dividend payouts. The other most common determining factors that are statistically significant in
explaining various forms of dividends payments are cash in hand, collateral value of assets, risks and size.
These results support dividend related agency cost theory of dividend payments.
The determinants that explain the slope difference in MCs and DCs across various dividend payout modes are
political risk, geographical diversification, 2-digit industry code diversification, effective tax rates, profitability
and size. Among, these variables, effective tax rates and profitability are two main dominant factors which
became consistently significant in explaining the difference of Australian MCs paying less dividends than their
domestic counterparts. The negative significant interaction slope variable of effective tax rates indicates that
Australian MCs shareholders are not in as good a position as DCs shareholders to utilise the benefit from the
dividend imputation tax credit. The resident shareholders of Australian MCs become inferior in receiving
dividends since they miss out in claiming tax credit on the tax payments made in overseas countries. This result
is consistent with the argument that Australian MCs tax expense payment in the overseas countries cannot be
part of the tax credit.
The negative significant interaction variable of profitability suggests that the Australian MCs receiving higher
profits than DCs has a significantly negative impact on regular cash dividends, special cash dividends, total
43
dividends and net dividends. This finding is consistent with the effective tax rate arguments. This result
indicates that receiving higher profits from overseas subsidiaries does not add any additional benefit to attract
shareholders because the tax that MCs subsidiaries pay in overseas countries cannot be claimed as a tax credit by
its resident shareholders. As a result, Australian MCs pay significantly lower dividends to their shareholders
relative to their DCs counterparts.
A further investigation of the degree of Australian firms foreign involvement on various forms of dividend
payments shows that holding assets in foreign countries and geographical expansion matters in determining
special cash dividends and net dividends only. In dividend increasing activities, Australian MCs are
comparatively more active than DCs and the factors motivating the likelihood of MCs increasing dividend
payments are political risk, cash in hand and firm size. Lastly, it is found that Australian MCs are significantly
less likely to be a dividend payer relative to DCs especially in paying regular cash dividends, total dividend and
net dividends. This could be due to the tax and profitability arguments discussed above which argues that
dividend payment is more costly for Australian MCs since the majority of its subsidiaries are located under a
classical tax regime and Australian Tax law does not permit MCs to offer their shareholders the tax credit on
dividends that are distributed from after-tax foreign income. As a result Australian MCs are relatively
disadvantaged as opposed to DCs whose income is predominantly from Australia under an imputation tax
system.
Appendix of A. Variable definitions
Dependent variables
:
i,t
i,t
i,t
Regular cash dividends
1. Cash dividends
Net Income
2. - :
i,t
i,t
i,t
Off market share repurchase
Off Market
Net Income
3. - :
i,t
i,t
i,t
On market share repurchase
On Market
Net Income
4. :
i,t
i,t
i,t
Special Cash Dividends
Special Cash
Net Income
:
i,t i,t i,t i,t
i,t i,t
i,t
i,t
Regular cash div ,regular script div ,bonus share plan ,special cash div ,
special script div ,off - market and on market share repurchase
5. Total Dividends
Net Income
| |
|
\ .
6.
:
i,t
i,t
Total Dividends - Newequity issues (via dividend reinvestment plans, right issues, public issues or private placements)
Net Dividends
Net Income
Independent variables
1. Multinationality:
1 ,
0 .
M u l t i n a t i o n a l c o r p o r a t i o n i f a c o r p o r a t i o n h a s f o r e i g n s a l e s
f o r e i g n a s s e t s a n d a t l e a s t t w o n u m b e r s o f c o u n t r i e s i n t i m e t ; a n d
D o m e s t i c c o r p o r a t i o n o t h e r w i s e
=
=
2. Political Risk:
e
e
e
= =
R i
i c
R i
i c i
R i
i c i c
I
I
P
,
,
,
where: C is the sample of companies;
R is the set of different countries from which the companies in the sample operate;
I
c,r
be the sales revenue of company c coming from a particular country, r;
i
denotes political risk rating for a given country in a given year; and
P
c,r
is the proportion of sales from a particular country relative to the total sales of company c:
e
=
R i
i c
r c
r c
I
I
P
,
,
,
3. Foreign Exchange Risk:
0 1 2 it mt xt it
R R TWI | | | c = + + +
Where:
it
R = continuously compounded return on firm ith corporations on week t;
45
0
| = regression constant;
xt
TWI
27
= continuously compounded return for Reserve Bank of Australias trade weighted index
(TWI) measured as the dollar price of the foreign currency and
2
| , the slope coefficient of the
regression is the exchange rate exposure;
mt
R = continuously compounded return on the market portfolio (Australian All Ordinary Index)
on week t;
it
c = random error term.
4. Diversification:
a. Product diversification:
2
10
1
2
22
1
2 _ 1- ( 10, 2- )
: ' 2- .
4 _ 1- (
i i
i
j
j
PROD CC s There are a total of digit industries in GICS
where s is the proportion of a firm s sales in each digit GICS industry i
PROD CC s The
=
=
=
=
22, 4- )
: ' 4- .
j
re are a total of digit industries in GICS
where s is the proportion of a firm s sales in each digit GICS industry j
a. International diversification:
,
,
,
*
i t
i t
i t
Foreign Sales
ln Total numbers of subsidiaries
Total Sales
| |
|
|
\ .
5. Effective Tax:
,
,
i t
i t
Tax Paid
Pre Tax Income
6. :
i,t
i,t
Cash
Cash
Total Assets
7.
:
i,t
i,t
Fixed Assets
Colletral value of assets
Total Assets
8.
i,t
RISK Standard deviation of weekly stock return =
,
,
:
i t
i t
Total Debt
Long term debt
Market Value of Equity
9.
,
,
i t
i t
Net Income
Profitability :
Capital Expenditure
10. : ln( ) SIZE Total Assets
11. AGE
i,t
= ln (age of firm i, in years from date of incorporation)
27
The trade weighted exchange rate is derived from the Datastream computed by Reserve Bank of Australia. The
Bank has revised the weights used for currencies in the trade-weighted index (TWI) for the Australian dollar, to allow
for changes in the country mix of Australia's trade during 1998/99. The revisions take effect from 1 October 1999. The
composition of the TWI is determined by Australia's two-way trade with its major trading partners. Currencies
sufficient to account for at least 90 per cent of aggregate trade are included.
http://www.rba.gov.au/MediaReleases/1999/mr_99_09.html
46
12.
, ,
,
,
- - :
i t i t
i t
i t
Market Value of Equity Book Value of Liabilities
Market to book
Book Value of Total Assets
+
13. Time: In order to capture year effect (e.g. business cycle shocks or economic downturn, tax law changes
and relaxation of share repurchase rules, etc), a dichotomous one and zero variable will be used for each year.
14. Industry: A zero one dummy variable will be used in the proposed models to capture the effect of industry
in both domestic and multinational corporations dividend payout policy.
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