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The accounting and mutual fund scandals of the last few years have led to increased scrutiny over the information provided by financial services to investors. These scandals have cast doubt on the supposedly honest and impartial reporting of facts by the financial industry. This paper looks at...
Persistent link: https://www.econbiz.de/10012737420
Finance textbooks recommend the use of Net Present Value (NPV) as the evaluation tool for Capital Budgeting. Yet surveys of managers have consistently shown that managers prefer Internal rate of Return (IRR) to NPV. This article rigorously establishes the validity of the interpretation of IRR as...
Persistent link: https://www.econbiz.de/10012738621
The accounting and mutual fund scandals of the last few years have led to increased scrutiny over the information provided by financial services to investors. These scandals have cast doubt on the supposedly honest and impartial reporting of facts by the financial industry. This paper looks at...
Persistent link: https://www.econbiz.de/10012778669
In this paper, we develop and test empirically a model of capital structure. We show analytically that the square of 1 minus the debt ratio (total debt divided by total assets) is positively associated with the inverse of total assets and negatively associated with the log of total assets...
Persistent link: https://www.econbiz.de/10013022055
I propose that the utility function of an economic agent will be concave for wealth below the current wealth and will be convex for wealth above the current wealth. This utility function allows the agent to display simultaneous risk averse and risk seeking behaviour. The cubic utility function...
Persistent link: https://www.econbiz.de/10012740517
This model explains dividends as a component of a screening contract set up by an uninformed principal. I start from a well documented empirical fact that there is a relation between dividends declared and executive compensation. I find that when hidden information is about the productivity of...
Persistent link: https://www.econbiz.de/10012740776
Recent studies have documented an association between managerial compensation and firm dividend policy. Bhattacharyya (2000) develops a model of dividend payout that is based in the principal-agent paradigm. In Bhattacharyya's model, managerial quality and effort are unobservable to shareholders...
Persistent link: https://www.econbiz.de/10012714969
While researchers have found that dividend payout ratios are negatively related to executive compensation in North America, a relevant question remains as to whether such relationships hold in other institutional environments. Evidence from this study suggests that, as in North America, there is...
Persistent link: https://www.econbiz.de/10012718579
Empirical modeling of dividends has been dominated by Lintner (1956). However, Lintner's model suffers from the logical paradox that if companies have target payout ratios then in the steady state the companies will have reached those target payout ratios. Moreover as demonstrated by Bond and...
Persistent link: https://www.econbiz.de/10012718600
Persistent link: https://www.econbiz.de/10003782210