昆士兰大学 公司理财Lecture3

FINM7402Lecture3:PayoutpolicyReadings:PBEHPchapter11LearningObjectives„Define‘dividendpolicy’andunderstandsomeinstitutionalfeaturesofdividendsandsharerepurchases.„Explainwhydividendpolicyisirrelevanttoshareholders’wealthinaperfectcapitalmarketwithnotaxes.„Outlinetheimputationandcapitalgainstaxsystemsandexplaintheireffectsonreturnstoinvestors.LearningObjectives„Identifythefactorsthatmaycausedividendpolicytobeimportant.„Befamiliarwiththenatureofsharebuybacks,dividendreinvestmentplansanddividendelectionschemes.„Outlinethemainfactorsthatinfluencecompanies’dividendpolicies.DividendPolicy„BusinessDecisions„Investment„Financing„Dividend„DividendPolicy„Determininghowmuchofacompany’sprofitistobepaidtoshareholdersasdividendsandhowmuchistoberetained.IsThereanOptimalDividendPolicy?„Withperfectcapitalmarkets„Dividendsdonotimpactshareholderwealth„Withcapitalmarketimperfections,thefollowingviewsexist:1.Dividendpolicydoesnotmatter.2.Ahighdividendpolicyisbest.3.Alowdividendpolicyisbest.DividendTimetable1.RiverCityMotorwayGroup(RCY)announces3¢distribution(19/6/08)2.Unitstradeex-distribution(3/7/08)3.Recorddateorbook-closingdate(9/7/08)4.Payabledate(27/8/08)5.Cum-distributiontradingperiod(19/6–2/7)19/63/79/727/8LegalConsiderations„Dividends„Mustbepaidfromprofit,notcapital„Cannotbepaidifitwouldmakethecompanyinsolvent„Mayberestrictedbyloanagreementsandcovenants„Mustobservepriorityrightsofpreferenceshares„CompanymaydecidetobuybackownsharesDividendPolicies„Residualdividendpolicy„Smootheddividendpolicy„ConstantpayoutpolicyManagersandPayoutDecisions„Dividendsarean‘activedecisionvariable’(Lintner).Brayet.al.(2005)find:„Maintainingcurrentlevelofdividendpershareisahighpriority„Managersseelittlerewardforincreasingdividends.„Dividendsareinflexible,smoothedrelativetoprofits.„SharerepurchasesareveryflexiblewithnoneedforsmoothingModiglianiandMiller(1961)„Giventheinvestmentdecisionsofthefirm,thedividendpayoutratiodoesnotaffectthewealthofshareholders„Assumptions„Afixedinvestmentorcapitalbudgetingprogram„Notransactioncosts,orothermarketimperfections(e.g.tax,informationasymmetry)„Notaxes—investorsareindifferentbetweenreceivingdividendsorcapitalgainsIrrelevanceTheory(MM)„Sourcesoffunds„X=Cashfromoperations„ΔS=Cashfromnewshareissues„Usesoffunds„I=Investment„nD=DividendsofDpaidtonissuedsharesXSInD+Δ=+MM’sConclusion„.impliesthatdividendpolicyisatrade-offbetween„Retainingprofitforinvestment,or„PayingdividendsandmakingnewshareissuestoreplacecashpaidoutXSInD+Δ=+ABCCompany10,000sharesoutstandingat$11115,000Total115,000Total110,000Equity100,000OtherAssets5,000Debt15,000CashMarketValueBalanceSheetABCCompany„Ifthe$15,000cashisinvested,sharesareworth$110,000„If$15,000ispaidindividendsandnewsharesworth$15,000areissuedinordertoinvest,originalshareholdershave$95,000insharesand$15,000incashABCCompany„Whatifoldshareholdersdon’twantthedividend,butstillwantcash?„Theycouldsell$15,000worthoftheirshares„Newshareholdersnowown$15,000inthecompany„Originalshareholdershave$95,000insharesand$15,000incash–sameasifadividendwaspaidMM’sConclusion„TheMMdividendirrelevancepropositionisvalidinaperfectcapitalmarketwithnotaxes„Therefore,ifdividendpolicyisimportantinpractice,thereasonsforitsimportancemustrelatetofactorsthatMMexcludedfromtheiranalysisTheImportanceofFullPayout„MM’sassumptionconstrainsacompanytopayingoutallitsfreecashflow(FCF)eachyear„DeAngeloandDeAngelo(DD)arguethattheMMapproachdoesnotprovethatpayoutpolicyisirrelevantbecausecompanyvaluecanbechangedifthecompanyretainspartofitsFCF.„IncontrasttoMM,DDconcludethatbothinvestmentpolicyandpayoutpolicyareimportant.TheImportanceofFullPayout„Insummary,DDarguethatmanagersareresponsiblefortwoimportantjobs:„Selectinggoodinvestmentprojects.„Ensuringthatoverthelifeoftheenterprise,investorsreceiveadistributionstreamwiththegreatestpossiblepresentvalue.Marketimperfections„DDandMMbothassumepcm.Inrealitytherearemarketimperfections:„Transactioncosts„Floatationcosts„Behaviouralfactorsanddividends„Taxes„Informationasymmetryandsignalling„AgencycostsDividendsandTaxes„Dividendsvs.CapitalGains„Retainedprofitshouldincreasesharevalue(taxedascapitalgain)„Dividenddistributionstaxedasordinaryincome„Classicaltaxsystem/imputationtaxsystemClassicalTaxSystem$500$350Netaftertax$500$350PersonalTax(@50%)$1,000$700Investorreceives0$700Availablefordividend0$300Companytax0$1,000Taxableincome$1,0000Interest$1,000$1,000EBITDebtEquityImputationSystem$500$500Netaftertax$500$200Taxrulesassessnettaxof$1,000$700Investorreceives0$700Availablefordividend0$300Companytax0$1,000Taxableincome$1,0000Interest$1,000$1,000EBITDebtEquityImputationSystem„Companyincomeistaxedattc.Companypaysafrankeddividend„Shareholderstaxedontheirshareofthecompanyincomebeforetax„“Gross-up”dividendto„Allowshareholderscreditfortheirshareofcompanytaxpaid„Frankingcredit=1cDt−1cctDt×−ImputationSystem$500$500Netaftertax$500$200Taxrulesassessnettaxof–$300Credit0.30×(D/0.70)$500$500Taxat50%$1,000$1,000Taxableamount$1,000Grossupdividend(D/0.70)$1,000$700InvestorReceivesDebtEquityImputationSystem„Thesha