Dividends and Strength of Japanese Business Group Affiliation

38 Pages Posted: 2 Feb 2012

See all articles by Raj Aggarwal

Raj Aggarwal

University of Akron; Federal Reserve Banks - Federal Reserve Bank of Cleveland; Kent State University; Kent State University Foundation

Sandra Dow

Monterey Institute of International Studies

Date Written: February 1, 2012

Abstract

While the study of dividend policy in Japan has investigated the role of group affiliation, it has heretofore neglected the impact of the strength of group affiliation. Using the strength of group association, a new variable in the study of dividend policy, we document that the probability of dividend payment by firms in Japanese business groups declines as the affiliation to the business group strengthens – a finding consistent with transferring cash from weakly associated firms to those strongly associated with the business group. Further, the contractual claimant position of main banks seems important as the ratio of short-term debt to long-term debt is negatively related to dividend payment in Japanese firms. Finally, we also reconfirm that dividends in Japan are positively related to firm size, profitability, and investment opportunities, and negatively to firm risk. These findings should be of much interest to managers, scholars, and policy-makers.

Keywords: Dividend policy, Japan, Corporate Governance, Business Groups, Tunneling, Panel Data Models

JEL Classification: G14, G35, G36

Suggested Citation

Aggarwal, Raj and Dow, Sandra, Dividends and Strength of Japanese Business Group Affiliation (February 1, 2012). Available at SSRN: https://ssrn.com/abstract=1997089 or http://dx.doi.org/10.2139/ssrn.1997089

Raj Aggarwal (Contact Author)

University of Akron ( email )

Akron, OH 44325-4803
United States

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Kent State University ( email )

College of Business Administration
Kent, OH 44242-0001
United States

Kent State University Foundation ( email )

Akron, OH 44325-4803
United States

Sandra Dow

Monterey Institute of International Studies ( email )

460 Pierce Street
Monterey, CA 93940
United States

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