Abinhav Goyal

Abinhav Goyal

PhD Thesis Title: Essays in Corporate Payout Determination.

Supervisor: Dr. Cal Muckley

External Examiner: Professor Chris Veld, University of Glasgow


This dissertation examines the relative importance of different theories of corporate pay out largely using data from outside the United States viz. Asia, Japan and South America. The empirical findings of this thesis together with the findings reported in the extant literature indicate the relative importance of the agency-cost based life-cycle theory (Jensen, 1986; DeAngelo et al., 2006) of corporate pay out policy determination. Other theories of corporate pay out determination; in relation to information asymmetries (Bhattacharya, 1979) or catering (Baker and Wurgler, 2004a,b) and clientele (Elton and Gruber, 1970) incentives and capital market imperfections are confronted with conflicting empirical evidence. It would appear that at best these latter theories are of second order importance with respect to the determination of the pay-out policy of the firm. These findings are supported by the deployment of a range of econometric models on a total of circa 100,000 firm-years across fifteen developing and two developed economies since the early 1990s.

The examination of corporate pay out policy in this thesis yields the following major results.  First, I find that in Asia although creditors exert a significant and far reaching influence on corporate pay out policy decision-making, the importance of the agency costs of equity predominate. Second, inconsistent with the first order importance of the signalling theory of pay out there is a rising concentration of pay out of Japanese firms over time. In addition, in line with the life-cycle theory of corporate pay out, large Japanese firms show a pronounced tendency to pay out and if they do so they tend to pay out more. Third, the findings in relation to South America indicate the importance of retained earnings to total equity, firm size, growth opportunities and profitability in respect to pay out determination. In contrast to the first order importance of information asymmetries in the determination of pay out policy, the tendency of high growth firms in South America to signal individual qualities by paying dividends has declined over time.

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