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Dividends and strength of Japanese business group affiliation

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  • Aggarwal, Raj
  • Dow, Sandra M.

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.

Suggested Citation

  • Aggarwal, Raj & Dow, Sandra M., 2012. "Dividends and strength of Japanese business group affiliation," Journal of Economics and Business, Elsevier, vol. 64(3), pages 214-230.
    • Handle: RePEc:eee:jebusi:v:64:y:2012:i:3:p:214-230
    DOI: 10.1016/j.jeconbus.2012.01.003
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    References listed on IDEAS

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    Cited by:

    1. Nishant B. Labhane, 2019. "Dividend Policy Decisions in India: Standalone Versus Business Group-Affiliated Firms," Global Business Review, International Management Institute, vol. 20(1), pages 133-150, February.
    2. George Halkos & Roman Matousek & Nickolaos Tzeremes, 2016. "Pre-evaluating technical efficiency gains from possible mergers and acquisitions: evidence from Japanese regional banks," Review of Quantitative Finance and Accounting, Springer, vol. 46(1), pages 47-77, January.
    3. Radić, Nemanja, 2015. "Shareholder value creation in Japanese banking," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 199-207.
    4. George E. Halkos & Roman Matousek & Nickolaos G. Tzeremes, 2016. "Pre-evaluating technical efficiency gains from possible mergers and acquisitions: evidence from Japanese regional banks," Review of Quantitative Finance and Accounting, Springer, vol. 46(1), pages 47-77, January.
    5. Shaif Jarallah & Wali Ullah, 2014. "Evolving corporate governance and the dividends behaviour regime in Japan," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 61(3), pages 279-303, September.

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