E. Theodore Veit

Why companies use open-market repurchases: A managerial perspective

Abstract We survey 642 top financial executives to learn their views about their firm’s share repurchases from January 1998 to September 1999. Based on 194 responses from managers of firms engaging in open-market repurchases, the results show that the most highly cited reasons for repurchasing shares of common stock are consistent with the signaling hypothesis, specifically the undervaluation version of this hypothesis. When compared to the results of previous surveys, our findings suggest that the importance management attaches to certain reasons for repurchasing shares of common stock may have changed over the past few decades. Reasons such as repurchasing shares to provide shares for incentive plans and to remove large blocks of stocks appear less important while reasons such as repurchasing shares to adjust the firm’s capital structure and to avoid dividend taxation appear more important.

Revisiting the dividend puzzle: Do all of the pieces now fit?

Abstract This paper revisits the dividend puzzle, described here as questions about the relevance of dividend policy and how managers should (and do) determine dividend policy. We examine theoretical and empirical research on dividends and share repurchases because they are the principal mechanisms by which corporations disburse cash to their shareholders. Despite a voluminous amount of study, researchers still do not have all the answers to the dividend puzzle. However, we are closer to its resolution. We also do not have definitive answers to why managers choose one method of cash distribution over the other. Solving the dividend puzzle may depend on understanding the effects of various market imperfections or frictions. Because various imperfections affect firms differently, dividend policy may vary substantially from one firm to another. Models that consider the competing frictions on a firm-specific basis offer promise for resolving the dividend puzzle.

REVISITING MANAGERIAL PERSPECTIVES ON DIVIDEND POLICY

We survey managers of Nasdaq firms that consistently pay cash dividends to determine their views about dividend policy, the relationship between dividend policy and value, and four common explanations for paying dividends. The evidence shows that managers stress the importance of maintaining dividend continuity and widely agree that changes in dividends affect firm value. Managers give the strongest support to a signaling explanation for paying dividends, weak to little support for the tax-preference and agency cost explanations, and no support to the bird-in-the-hand explanation. The study provides new evidence about how managers view dividend life cycles and residual dividend policy.

Ethics violations: A survey of investment analysts

The authors analyze the responses to a mail survey of securities analysts who were asked about their ethical behavior and the ethical behavior of people with whom they work. The findings show the types of ethical violations that occur and the frequency with which they occur. The findings also show how respondents deal with observed violations of ethical behavior. All responses are analyzed to determine if differences exist between the responses of analysts having different characteristics (gender, age, years of employment, and education), and differences in employment circumstances (firm size, firm type, buy side/sell side, U.S./Canada).

A comparison of ethics of investment professionals: North America versus Pacific rim nations

This study examines the ethical attitudes and practices of securities analysts and portfolio managers from four Pacific Rim countries – Hong Kong, Japan, Singapore and Thailand – and compares the findings to a similar study of North American investment professionals to identify significant differences. The findings show that many differences exist due to cultural differences and differences in the regulatory environment between the Pacific Rim countries studied and North America.