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b y Caroline Eva Mursito 16943

8 th class of seminar in finance Relations among Financing Decision, Dividend Policy, and Ownership. b y Caroline Eva Mursito 16943. ARTICLE FROM CRP. Title: Interrelationships among capital structure, dividend, and Ownership: Evidence from South Korea Theory used:

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b y Caroline Eva Mursito 16943

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  1. 8th class of seminar in financeRelations among Financing Decision, Dividend Policy, and Ownership by Caroline Eva Mursito 16943

  2. ARTICLE FROM CRP • Title: • Interrelationships among capital structure, dividend, and Ownership: Evidence from South Korea • Theory used: • The convergence of interests theory • Entrenchment theory • Pecking Order Theory • Asymmetric information • Agency cost theory

  3. Hypothesis: • Debt policy, dividend policy, and ownership structure might be related directly through information asymmetry and agency theory. • Causality may proceed in either direction between each pair of variables. • Method of analysis: • 3 stage least squares (3SLS) methodology • Variable used in research: • Firm’s leverage (LEV) • Dividends (DIV) • Firm ownership (OWN) • Firm’s cash flow (CF) • Firm liquidity (CR) • Profitability (PRO)

  4. Result of the analysis: • Table 1 • There is descriptive statics for all of the variables defined in the data and empirical methodology section. And the entire variable exhibit a relatively small amount of variation, particularly when adjusting for the scaling (or units of measurement) of the data. • Table 2 • There are correlation coefficients among the three policy variables and the four control variables. DIV, CF, CR, and PRO variables are significantly and negatively correlated with LEV variable. CF and PRO variables have a positive association with DIV variable. • Table 3 • The OLS and 3SLS estimates for the debt equation. The collection of regressors in each equation jointly explains a significant amount of variation in our leverage variable. The coefficient estimated for OWN is negative, DIV variable is positive, CF and CR are negative, and the coefficient for PRO is not statistically different from zero. There are some striking differences in sign, magnitude, and significance. • Table 4 • The OLS and 3SLS estimates for the dividend equation. F-statistics exceed the critical value which is at 5% level of significance. OWN and LEV coefficient estimates are both positive, 3SLS coefficient estimates CF and CR are positive and significant. There are also some striking differences in sign, magnitude, and significance. • Table 5 • The OLS and 3SLS estimates for the ownership equation and statistically significant at the 5% level.CF and CR variables are negative and significant coefficient estimates, and the coefficient for SIZE is not significant. • Table 6 • Highlights the finding about the relationship between the convergence of interest and entrenchment theories.

  5. Conclusions: • The higher levels of ownership and dividends negatively affect leverage. • Ownership and leverage both positively impact dividends. • Leverage is negatively associated with ownership, while dividends positively impact ownership.

  6. ARTICLE FROM STUDENT • Title: • The relationship Between Ownership Structure and Corporate Dividend policy-Evidence from The Athens Stock Exchange • Theory used: • Dividend signaling theory • Agency theory • The theory of the short-sighted institutional investors

  7. Hypothesis: • The presence of institutional investors can mitigate the use of dividend policy as a signal of high profitability. • Lower levels of managerial ownership, the ownership of shares by managers leads to the alignment of their interests with those of external shareholders, usually resulting in a high dividend yield. • Method of analysis: • Full adjustment model • Partial adjustment model • Earnings trend model • Variables used in research: • Dividends • Earnings • Institutional ownership • Managerial ownership

  8. Results of the analysis: • Full adjustment model • The effect of institutional and managerial ownership has a negative effect on the explanatory power of the model. All of the coefficients are statistically significant and demonstrate the parallel and opposite effect that the specific classes of investors have on the decisions regarding dividend policy. • Partial adjustment model • When the estimation of the model is made on the assumption that the unobservable effects are random effects, the statistical results are weak and unsatisfactory. The inclusion of the terms representing the presence of institutional investors and the managerial ownership with a time lag of one period brings out the inverse relationship between the two independent variables. • Earnings trend model • The independent variables appear to be statistically significant, their signs are opposite to those expected and are not in accordance with the intense and opposite effects of the institutional and the managerial ownership. • Conclusions: • There is a statistically significant positive relationship between the adjusted independent variables and the presence of institutional investors. • The adjusted independent variables show statistically significant negative correlation with the managerial ownership variable.

  9. THANK YOUforYOUR ATTENTION

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