Arman Kosedag

The perception of dividends by professional investors

Purpose – To study the perception of dividends by the professional investor, for whom mutual fund managers are a proxy. The main line of research in dividends is based on using market data that are fit, ex post, to a cherished hypothesis. It is believed, however, that such data cannot measure motivation which is the underlying force behind generating market data. An understanding of motivation will give us more insight into the dividend paradox (why shareholders love dividends) than just the surface reality one can glean from market data. Design/methodology/approach - Using a survey instrument, the method of analysis (not methodology) is factor analysis and hierarchical grouping that uncovers three distinct groups of professional investors re their attitude towards dividend. This categorization clearly shows that the dividends are perceived differently by the groups found here. Thus, research in dividends cannot follow a traditional route in which the phenomenon is treated as universal, or something similar to a natural occurrence. Findings - Three groups from the more traditional: the more growth-oriented, aggressive; and a middle-of-the-road group are posited. Although there are some uniformly accepted tenets across the groups, nevertheless, the more traditional group attributes far more importance to dividends than the growth-oriented group. The latter group perceives dividends as something needed to pacify the shareholder. It is also concluded that none of the academic hypotheses contrived to explain dividend behavior can be supported by empirical evidence. The interesting result is, nevertheless, that the ex post group performance is not significantly different between each possible pairing of the three groups. Research limitations/implications - As all empirical research goes, results cannot be all-conclusive, because of time and participation in the sample. This fact alone should not grind to a halt all empirical work. This work is part of a segment of three different studies examining the perception of dividends by corporate managers, and across countries. The next logical step is obviously studying the perception of dividends by the non-professional investor. Originality/value - This kind of work was almost never done. This is a first, because unfortunately traditional research that dominates most finance journals does not believe that motivation counts. First, because it satisfies ones desire to better understand the dividend puzzle. But it should be of interest to all who want to study the dividend decision in the firm, and why shareholders love dividends, something entirely not rational as far as economic rationality goes.

Dividend initiations in reverse-LBO firms

Abstract This article documents a lack of share price response to dividend initiation announcements by firms that recently completed a reverse-LBO. We identify a group of firms that had recently completed an IPO and report that they experience a positive reaction to dividend initiation announcements as expected based on the prior dividend initiation literature. We rule out a size-based explanation for the abnormal response in reverse-LBOs and offer some potential explanations for our empirical findings.

Reverse‐LBOs, re‐LBOs and informational asymmetry hypothesis of LBO transactions

Purpose - The purpose of this paper is to examine the informational asymmetry (informational advantage of managers) in leveraged buyout (LBO) transactions. Design/methodology/approach - Unlike previous studies of informational asymmetry in LBOs, this research uses a set of reverse-LBO and re-LBO firms. The paper proposes and empirically tests three hypotheses that draw on the informational advantage of managers in LBOs. Specifically, the value gain (VG) realized by the reverse-LBO firms is compared with that realized by a control sample of firms; the wealth distribution between managers and pre-buyout shareholders is studied; and, finally, the performance of re-LBO firms relative to reverse-LBO firms is evaluated. Findings - The results do not support the view that managers use buyouts to exploit their informational advantage. Specifically; the performance of LBO firms under the private ownership is comparable to those of matching public firms; the management teams return in a LBO deal is not significantly more than pre-buyout shareholders’ return; and repeating reverse-LBO firms (re-LBOs) do not necessarily perform better than the non-repeating reverse-LBO firms. Originality/value - While reverse-LBOs have been investigated to some extent in the prior literature, studies on re-LBOs are quite scant – although these transactions offer a new and interesting avenue to examine the motivations behind LBOs in general. The use of the entire LBO?-?reverse-LBO?-?re-LBO cycle in testing the informational advantage of managers is a novelty. It is hoped that re-LBOs will attract the amount of attention they deserve as these firms may offer interesting means to reinvestigate commonly debated theories of corporate finance.

Testing for convergence in bank efficiency: a cross-country analysis

This paper empirically investigates a possible convergence among the operational efficiency of financial institutions across countries. We explore (i) the relative performance of banking industries in two samples (European and global) over time, and (ii) whether banking industries are likely to attain the same level of efficiency in the long run as implied by international financial integration. We find that convergence in bank efficiency is incomplete and limited to European banking industries. Differing level of bank efficiencies across the globe may offer opportunities for international investors who would like to capitalize on such market imperfections. Our findings also have implications for policy makers who are concerned with the full integration and the stability of the global financial system.

Management's perception of leveraged buyouts

Abstract In this paper we study managements perception of and motivation for a Leveraged Buyout. In contrast to other studies that use market and accounting data to infer about motives, this work is an analysis of survey generated data, directly addressing perception/motivation. We posit and formally test three hypotheses. Our finding are in contrast in general to conclusions drawn from market data based studies.

Gold or Pyrite: The Importance of Information to the Professional Investor

The individual investor is faced with an ever-increasingstream of traditional and electronic sources of often contra-dictory financial information. This survey examines the rel-ative importance of government economic indicators, printmedia sources, and broadcast media programs to equitymutual fund managers. We find that these professionals ratethe Philadelphia Fed Index—a regional summary manufac-turing measure—as significantly more important to theirinvestment decision-making process than other better knownmeasures. At the same time, The Wall Street Journaldominatesprint media sources while CNBCs Squawk Box signifi-cantly dominates other broadcast media programs. The find-ings of this survey suggest that individual investors cansignificantly reduce the volume of investment informationsources in their investment decision-making process.