2022 Fiscal Year Research-status Report
Management Disclosure of Long-term Payout Targets, Firm Performance and Corporate Governance
| Project/Area Number |
22K01576
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| Research Institution | Akita International University |
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Principal Investigator |
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| Project Period (FY) |
2022-04-01 – 2025-03-31
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| Keywords | Corporate dividends / Corporate payout policy / Firm performance / Corporate governance |
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| Outline of Annual Research Achievements |
Corporations' management have long been thought to maintain long-term dividend payout targets, but there is little evidence on what these targets are or how they evolve over time. This project is developing a database of voluntary long-term payout target disclosures by publicly-listed Japanese firms. The properties of voluntarily disclosed payout targets and their relationships with firm performance, stock returns, actual payouts, bankruptcy risk and corporate governance characteristics is being investigated.
So far, the project has progressed as follows. Data on Japanese firms' voluntary payout target disclosures in the Yukashouken Houkokusho (有価証券報告書), known as the Yuho, has been collected and extended using textual analysis techniques. The data has been checked, cleaned and verified by both computational and manual human methods. This exposed some anomalous and ambiguous instances in the machine collected target data. The textual analysis methods used for collection were improved and additional information reflecting the context of the voluntary target disclosure statements was collected so that any anomalous data can be efficiently resolved. A large database of firm-level financial and governance data is being assembled from data vendors, and this is partially complete at present. Some initial time series and cross-sectional analyses of the payout targets have been completed.
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| Current Status of Research Progress |
Current Status of Research Progress
3: Progress in research has been slightly delayed.
Reason
The collection, update, cleaning, verification and interpretation of publicly-listed firms' voluntary payout target disclosures, as well as collection of firm-level financial and governance data, has taken longer than expected.
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| Strategy for Future Research Activity |
The collection of firm-level financial and governance data will be completed. New firm-level voluntary payout target data will be added to the data-set when it becomes available. We will then estimate and revisit models of dividend smoothing based on Lintner’s partial adjustment model and other models in the literature that relate ex-post payouts to payout targets. The analysis will also investigate the relationships between payout target disclosures and firm performance, stock returns, bankruptcy risk and corporate governance characteristics. The methods that will be used include using panel regressions of factor models and Fama-MacBeth regressions.
Over recent years, stock repurchases have become a prominent means of payout policy by publicly-listed corporations. Given the large cash holdings of Japanese firms and financial market expectations of an increase in repurchases by Japanese firms, the project will examine how stock repurchases can be more extensively incorporated in the analysis.
The Principal Investigator plans to present the research and initial findings at academic conferences in 2023.
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| Causes of Carryover |
The unused funds from 2022 were generated by the project's data collection being slightly delayed. This resulted in no travel for the presentation of results in 2022. The amount carried over to 2023 is planned to be used to purchase data and for travel to present research results.
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