Does Conservative Accounting Matter to Cash Dividend Policy

 

William Bradford

University of Washington, Seattle

Chao Chen

Fudan University

Song Zhu

Beijing Normal University

The story

Chinese listed firms on average paid out just 22% of their earnings in 2001-2006 period. Their average dividend yield was as lower as 0.70% in the this period.

The Chinese stock market is considered as an emerging market with weak shareholder protection due to low cash dividends. However, high dividend may affect the interest of bondholders.

The story

Very few Chinese listed firms repurchased their stocks prior to 2008.

Stock dividends are not unusual.

No bond covenant restriction of paying dividend in our studying period.

Earnings management is a wide spread phenomenon of Chinese listed firms.

SOEs have less capital constraint relatively to NSOEs.

Motivation

Without the restriction by corporate bond covenants of Chinese listed firms, does accounting conservatism influence corporate dividend policy?

Can conservative accounting reduce dividends and thereby protect creditor claims and mitigate the creditor-shareholder agency conflict?

SOEs adopt less conservative accounting than NSOEs, do they pay more cash dividends?

Main Findings Conservative accounting reduces the payment and the

probability of overpayment of cash dividends of listed firms in China, and thus mitigates the stockholder-creditor agency problem.

Even though the SOEs are more conservative than NSOEs due to political costs, lenders (mostly banks) are less concerned with downside risk for SOEs than for NSOEs, which will result in fewer restrictions on cash dividend payout.

Due to the less capital constraint, SOEs are more likely and pay more cash dividends than NSOEs.

Hypotheses

H1: Ceteris paribus, firms with more conservative accounting are less likely to pay cash dividends to shareholders.

H2: Ceteris paribus, firms with more conservative accounting tend to pay less cash dividends to shareholders.

Hypotheses

H3: Ceteris paribus, firms with more conservative accounting are less likely to overpay cash dividends to shareholders.

H4: The influence of conservative accounting on dividend policy is smaller for state-owned firms than for non state-owned firms.

Samples and Data Source The new accounting standards became effective in

China on January 1, 2007.

The corporate bond new issues were started in 2007.

The ownership reform to convert non-tradable shares to tradable shares was implemented for a small group of companies in 2005, then gradually expanded to most of the companies in 2007.

Samples and Data Source

Eliminate those sample firms without ultimate shareholder information; with missing financial data; listed less than one year; in the financial industry; and with negative earnings but paid dividend.

Samples and Data Source The final samples include 4,458 firm-year observations

from 2001 to 2006.

Cash dividend policy data and other financial data are collected from the Wind/CSMAR database

The information about ultimate shareholders is collected manually from annual financial reports.

Samples and Data Source

Eliminate those sample firms without ultimate shareholder information; with missing financial data; listed less than one year; in the financial industry; and with negative earnings but paid dividend.

Cash dividend

To pay or not to pay cash dividend

Div: Div=1, if the firm paid cash dividend, 0 otherwise. The degree of cash dividend

Payout: cash dividend per share / current year EPS

Yield: cash dividend per share / stock price per share at the beginning year

Overpayment of cash dividend

OverPay=1, if Payout > payout of the industry average

OverYield =1, if Yield > yield of the industry average

Accounting conservatism

Givoly and Hayn (2000) proposed accrual based measure of conservative accounting

We follow the accrual measure used by Ahmend et al. (2002) and Ahmend and Duellamen (2007): Conserv=

(Three-year cumulative accruals/year end total assets) * (-1),

so the higher of this measure, the higher the accounting conservatism.

Accruals of each year = earnings after extraordinary items + depreciation – cash flow from operation

Other measures

Conserv > 0, the accounting is conservative Conserv <0, the accounting is aggressive

Beatty et al. (2008) Khan and Watts (2009): Cscore

M/B: The total market value divided by book value of equity at the end of the year

Table 1 Descriptive Statistics

Variables N Mean SD 25% 50% 75%

Div 4458 0.439 0.496 0 1 1 Payout 4458 0.224 0.323 0 0 0.411

Yield (%) 4458 0.699 1.217 0 0 0.983 Cashdiv/Asset 4458 0.009 0.016 0 0 0.013

Conserv 4458 0.013 0.189 -0.082 0.013 0.109 Cscore 4458 0.076 0.035 0.051 0.078 0.101

M/B 4458 3.211 3.073 1.535 2.315 3.691

Grow 4458 0.249 0.675 -0.019 0.138 0.336 CF 4458 0.050 0.079 0.010 0.050 0.093

ROE (%) 4458 -0.400 31.591 1.315 4.940 8.924 Manown (%) 4458 0.029 0.122 0.001 0.009 0.027

Stockdiv 4458 0.098 0.298 0 0 0 Lev 4458 0.500 0.184 0.373 0.510 0.629 Age 4458 7.548 2.724 5 7 9 Size 4458 21.212 0.944 20.601 21.155 21.813 V 4458 0.422 0.163 0.289 0.407 0.550

CV 4458 0.847 0.251 0.728 1 1 State 4458 0.764 0.424 1 1 1

Table 1 Descriptive Statistics(for SOEs)

SOEsVariables N Mean SD 25% 50% 75%

Div 3406 0.475 0.499 0 0 1Payout 3406 0.252 0.336 0 0 0.451

Yield (%) 3406 0.791 1.288 0 0 1.126Cashdiv/Asset 3406 0.010 0.017 0 0 0.016

Conserv 3406 0.013 0.181 -0.081 0.012 0.104Cscore 3406 0.074 0.036 0.049 0.077 0.101M/B 3406 3.033 2.723 1.523 2.288 3.550Grow 3406 0.227 0.591 -0.009 0.139 0.328

CF 3406 0.054 0.077 0.014 0.054 0.096ROE (%) 3406 0.778 27.135 1.355 5.019 8.830

Manown (%) 3406 0.027 0.106 0.001 0.009 0.027Stockdiv 3406 0.094 0.293 0 0 0

Lev 3406 0.485 0.183 0.357 0.497 0.618Age 3406 7.399 2.732 5 7 9Size 3406 21.303 0.935 20.682 21.241 21.879V 3406 0.453 0.161 0.318 0.455 0.581

CV 3406 0.905 0.206 0.999 1 1

Table 1 Descriptive Statistics(for Non-SOEs)NSOEsVariables N Mean SD 25% 50% 75%

Div 1052 0.320 0.466 0 0 1Payout 1052 0.135 0.258 0 0 0.178

Yield (%) 1052 0.404 0.885 0 0 0.398Cashdiv/Asset 1052 0.005 0.011 0 0 0.005

Conserv 1052 0.013 0.214 -0.087 0.018 0.125Cscore 1052 0.080 0.033 0.057 0.082 0.104M/B 1052 3.785 3.949 1.590 2.430 4.373Grow 1052 0.320 0.892 -0.064 0.131 0.376

CF 1052 0.036 0.085 -0.004 0.038 0.081ROE (%) 1052 -4.219 42.751 1.113 4.660 9.358

Manown (%) 1052 0.037 0.164 0 0.006 0.026Stockdiv 1052 0.112 0.315 0 0 0

Lev 1052 0.548 0.176 0.428 0.556 0.658Age 1052 8.031 2.641 6 8 10Size 1052 20.916 0.910 20.361 20.895 21.545V 1052 0.320 0.126 0.242 0.290 0.379

CV 1052 0.659 0.290 0.445 0.668 0.960

Table 2 Spearman vs. Pearson Correlation Matrix

Div Payout Yield Cashdiv/Asset Conserv Cscore MB

Div 0.947*** 0.947*** 0.942*** -0.132*** -0.110*** -0.123***

Payout 0.784*** 0.940*** 0.947*** -0.111*** -0.150*** -0.132***

Yield 0.650*** 0.670*** 0.958*** -0.081*** -0.077*** -0.193***

Cashdiv/Asset 0.640*** 0.716*** 0.773*** -0.115*** -0.189*** -0.084***

Conserv -0.120*** -0.072*** 0.001 -0.066*** 0.166*** 0.031***

Cscore -0.106*** -0.174*** 0.005 -0.237*** 0.143*** 0.068***

MB -0.094*** -0.079*** -0.084*** -0.049*** 0.075*** 0.107***

Table 3 Mean Comparison of Fundamentals between Aggressive Accounting and Conservative Accounting

N State

LEV

All SOE NSOE

DumConserv

0 2067 0.766 0.466 0.452 0.513

1 2391 0.761 0.529 0.514 0.577

Diff 0.005 -0.063 -0.062 -0.064

t 0.408 -11.626*** -10.068*** -5.958***

Table 4 Mean Comparison of Cash Dividend Policy between Aggressive Accounting and Conservative Accounting

N Div Payout Yield Cashdiv/Asset

DumConserv

0 2067 0.488 0.244 0.694 0.010

1 2391 0.396 0.207 0.704 0.008

Diff 0.091 0.037 -0.009 0.001

t 6.174*** 3.846*** -0.255 3.684***

Table 5 Mean Comparison of Conservatism for Firms with and without Cash Dividends

N Conserv Cscore M/B

Div

0 2501 0.033 0.079 4.597

1 1957 -0.012 0.071 2.632

Diff 0.046 0.007 1.964

t 8.128*** 7.166*** 6.330***

Table 6Cash Dividend Payment and Accounting Conservatism

Variables Conserv Conserv Conserv Conserv Conserv Conserv Conserv Conserv

Age 0.005 0.007 0.007 0.006 0.006 0.007 0.007 0.007 (1.27) (1.44) (1.56) (1.42) (1.46) (1.48) (1.58) (1.50)

PreDiv -0.063***(-12.19)

Div -0.051***(-5.78)

PrePayout -0.034***(-3.79)

Payout -0.032***(-3.79)

PreYield -0.013***(-4.42)

Yield -0.006**(-2.07)

PreCashdiv/Asset -1.210***(-6.60)

Cashdiv/Asset -1.075*** (-6.03)

Size -0.013** -0.021*** -0.019*** -0.020*** -0.015*** -0.022*** -0.021*** -0.020***

(-2.41) (-4.07) (-3.31) (-3.73) (-2.60) (-4.03) (-3.57) (-3.70) LEV 0.209*** 0.237*** 0.239*** 0.215*** 0.217*** 0.237*** 0.245*** 0.221***

(8.95) (9.79) (10.58) (9.12) (10.02) (10.02) (10.40) (9.58)

Table 6 Cash Dividend Payment and Accounting Conservatism (Continued)

Variables Conserv Conserv Conserv Conserv Conserv Conserv Conserv Conserv

CF 1.222*** 1.208*** 1.220*** 1.232*** 1.239*** 1.211*** 1.214*** 1.242***

(16.36) (16.21) (16.25) (15.93) (16.50) (16.30) (16.58) (16.61) Manown -2.952* -3.341* -3.239* -3.005* -2.490 -3.190 -3.406* -2.944

(-1.77) (-1.67) (-1.66) (-1.67) (-1.29) (-1.60) (-1.66) (-1.57) V -0.031 -0.028 -0.026 -0.020 -0.030 -0.029 -0.029 -0.020

(-1.22) (-1.05) (-0.96) (-0.74) (-1.15) (-1.07) (-1.11) (-0.75) CV 0.000 -0.001 -0.001 -0.000 0.001 -0.001 -0.002 -0.001

(0.01) (-0.03) (-0.04) (-0.02) (0.03) (-0.05) (-0.08) (-0.06) State 0.014 0.014* 0.014 0.013 0.014* 0.014* 0.014 0.014

(1.62) (1.68) (1.56) (1.53) (1.69) (1.70) (1.62) (1.60)

Grow -0.051*** -0.055*** -0.055*** -0.057*** -0.047*** -0.054*** -0.054***-

0.052***

(-5.58) (-5.36) (-5.33) (-5.43) (-4.49) (-5.38) (-5.02) (-5.24)

Growsq 0.012*** 0.013*** 0.013*** 0.014*** 0.012*** 0.013*** 0.013*** 0.013***

(6.89) (6.93) (6.91) (6.91) (5.83) (6.97) (6.54) (6.84) Inds Control Control Control Control Control Control Control ControlObs. 4458 4458 4458 4458 4458 4458 4458 4458

Pseudo R2 0.310 0.292 0.292 0.298 0.302 0.291 0.290 0.295

Table 7Accounting Conservatism, Cash Dividend Payment Level and Ownership Structure

Variables Expsign Div Payout Yield Cashdiv/Asset

Conserv − -1.036*** -1.274*** -0.272*** -0.310*** -0.722*** -0.816*** -0.013*** -0.015***

(-2.70) (-3.20) (-10.86) (-9.24) (-15.10) (-12.35) (-16.01) (-16.83)

State ＋ 0.089 0.011 0.051*** 0.039** 0.119** 0.087* 0.002** 0.001*

(0.95) (0.09) (2.65) (2.03) (2.25) (1.70) (2.37) (1.67)State

Conserv＋ 0.176 0.028*** 0.070*** 0.001***

(1.28) (3.74) (3.12) (3.01)

Lev − -3.137*** -3.166*** -0.811*** -0.816*** -2.139*** -2.152*** -0.038*** -0.039***

(-10.76) (-10.73) (-21.62) (-22.02) (-10.89) (-18.21) (-18.95) (-19.21)

V ? 0.307 0.307 0.058 0.059* 0.288*** 0.291** 0.008*** 0.008***

(1.22) (1.22) (1.64) (1.67) (3.22) (2.01) (4.22) (4.24)

CV ? 0.217 0.206 0.042* 0.040* 0.141* 0.136* 0.002 0.002

(0.95) (0.89) (1.73) (1.67) (1.92) (1.86) (1.40) (1.33)

CF ＋ 4.256*** 4.174*** 0.788*** 0.774*** 3.126*** 3.088*** 0.053*** 0.053***

(5.13) (5.22) (4.97) (4.92) (8.72) (23.99) (7.56) (7.58)

Table 7Accounting Conservatism, Cash Dividend Payment Level and Ownership Structure(continued)

VariablesExpsig

nDiv Payout Yield Cashdiv/Asset

ROE ＋ 0.064*** 0.065*** 0.013*** 0.013*** 0.047*** 0.047*** 0.001*** 0.001***

(3.00) (3.05) (26.72) (26.76) (28.57) (28.58) (20.08) (20.12)

Manown ＋ 0.788** 0.808** 0.187*** 0.190*** 0.423*** 0.431*** 0.008*** 0.008***

(2.30) (2.37) (5.22) (5.32) (3.60) (3.66) (2.92) (2.98)

Age ? -0.048* -0.050* -0.019*** -0.019*** 0.004 0.004 -0.000***-

0.000***

(-1.71) (-1.76) (-10.86) (-10.90) (0.89) (0.82) (-5.83) (-5.91)

Size ＋ 0.728*** 0.727*** 0.155*** 0.155*** 0.599*** 0.598*** 0.007*** 0.007***

(12.55) (12.57) (18.70) (18.69) (19.65) (19.63) (17.81) (17.77)

Predividend ＋ 1.770*** 1.770*** 0.547*** 0.546*** 0.725*** 0.725*** 0.547*** 0.548***

(8.51) (8.47) (30.28) (30.29) (30.94) (30.93) (9.82) (9.82)

Stockdiv ? 0.665*** 0.669*** 0.033*** 0.034*** 0.146*** 0.147*** 0.003*** 0.003***

(3.45) (3.50) (3.04) (3.09) (3.93) (3.98) (5.01) (5.07)

Inds Control Control Control Control Control Control Control Control

4458 4458 4458 4458 4458 4458 4458 4458

Pseudo R2 0.3882 0.3895 0.2874 0.2879 0.2438 0.2440 0.5750 0.5759

Table 8 Cash Dividend Policy and Accounting Conservatism - SOEs and NSOEs

VariablesSOE NSOE

Div Payout Yield Cash/Asset Div Payout Yield Cash/Asset

Conserv -0.535** -0.247*** -0.696** -0.012*** -0.910*** -0.380*** -0.818*** -0.015***

(-2.39) (-3.59) (-2.48) (-31.31) (-2.80) (-3.49) (-5.07) (-6.47)

Lev -1.929*** -0.815*** -2.136*** -0.039*** -1.335*** -0.738*** -2.015*** -0.033***

(-10.42) (-20.37) (-16.33) (-16.83) (-3.71) (-12.02) (-3.27) (-9.94)

V 0.012 0.028 0.161* 0.007*** 0.788** 0.267** 1.078*** 0.013***

(0.06) (0.38) (1.83) (3.70) (2.47) (2.44) (5.38) (2.90)

CV 0.193 0.087*** 0.306*** 0.003** -0.005 -0.039 -0.159** -0.001

(1.41) (3.00) (3.01) (1.98) (-0.02) (-1.10) (-1.98) (-0.64)

CF 2.509*** 0.727*** 3.063*** 0.052*** 2.732*** 0.936*** 3.079*** 0.051***

(5.14) (3.39) (4.93) (5.92) (12.18) (4.10) (4.41) (5.30)

ROE 0.036*** 0.014*** 0.053*** 0.001*** 0.023*** 0.010*** 0.030*** 0.000***

(5.06) (20.27) (20.34) (15.44) (3.77) (19.23) (21.61) (15.85)

Manown 0.428*** 0.174*** 0.376*** 0.008** 0.485 0.170** 0.420 0.006**

(3.80) (16.23) (10.72) (2.16) (1.41) (2.04) (1.58) (1.99)

Table 8 Cash Dividend Policy and Accounting Conservatism - SOEs and NSOEs(continued)

Variables

SOE NSOE

Div Payout Yield Cash/Asset Div Payout Yield Cash/Asset

Age -0.027* -0.018*** 0.010* -0.000*** -0.040 -0.021***-

0.010***-0.001***

(-1.77) (-8.87) (1.73) (-4.44) (-1.30) (-5.85) (-4.52) (-6.15)

Size 0.417*** 0.138*** 0.568*** 0.006*** 0.414*** 0.201*** 0.659*** 0.007***

(9.84) (16.73) (17.21) (15.18) (5.84) (9.88) (9.24) (9.48)

Predividend

1.067*** 0.521*** 0.709*** 0.537*** 1.061*** 0.631*** 0.758*** 0.589***

(9.60) (26.53) (27.07) (10.15) (6.86) (17.75) (12.34) (6.77)

Stockdiv 0.308** 0.009 0.082** 0.002*** 0.581*** 0.059** 0.214*** 0.004***

(2.11) (0.96) (2.21) (3.06) (3.40) (1.99) (3.04) (3.80)

Inds Control Control Control Control Control Control Control Control

Obs. 3406 3406 3406 3406 1052 1052 1052 1052

Pseudo R2 0.3856 0.2705 0.2395 0.5244 0.3902 0.3378 0.2557 0.6847

Table 9Probit Model for Accounting Conservatism, Cash Dividend Overpayment, and Ownership Structure

Variables Expsign OverPay OverYieldConserv − -0.514*** -0.585*** -0.366** -0.340**

(-3.44) (-3.99) (-2.39) (-2.07)State ＋ 0.187*** 0.163** 0.143** 0.152***

(2.66) (2.03) (2.23) (2.76)State Conserv ＋ 0.052 0.019

(0.86) (0.22)Lev − -1.884*** -1.893*** -1.882*** -1.879***

(-10.82) (-10.81) (-8.54) (-8.24)V ? 0.093 0.094 0.017 0.017

(0.46) (0.46) (0.10) (0.10)CV ? 0.082 0.079 0.123 0.124

(0.87) (0.84) (0.97) (0.96)CF + 2.157*** 2.133*** 2.485*** 2.495***

(5.61) (5.59) (13.07) (12.92)ROE + 0.027*** 0.027*** 0.030*** 0.030***

(7.22) (7.27) (6.05) (6.08)Manown + 0.340* 0.345* 0.066 0.064

(1.73) (1.76) (0.26) (0.25)

Table 9 Probit Model for Accounting Conservatism, Cash Dividend Overpayment, and Ownership Structure (continued)

Variables Expsign OverPay OverYield

Age ? -0.024** -0.024** -0.037*** -0.037***

(-2.45) (-2.51) (-4.24) (-4.26)

Size + 0.450*** 0.449*** 0.488*** 0.488***

(12.94) (12.87) (12.61) (12.66)

Predividend + 1.272*** 1.272*** 0.540*** 0.540***

(11.37) (11.30) (15.32) (15.34)

Stockdiv ? -0.153 -0.152 -0.046 -0.046

(-1.45) (-1.45) (-0.49) (-0.49)

Inds control control control control

Obs. 4458 4458 4458 4458

Pseudo R2 0.2943 0.2943 0.3539 0.3540

Table 10 Other Conservatism Measures

VariablesCscore M/B

Payout Yield OverPay OverYield Payout Yield OverPay OverYield

Conserv 4.340 18.428 12.218 6.701 -0.018*** -0.071*** -0.033* -0.122***

(1.58) (1.09) (0.77) (0.49) (-3.65) (-2.75) (-1.76) (-2.76)

State 0.097*** 0.098 0.186 0.084 0.056*** 0.178*** 0.197** 0.054

(3.43) (0.99) (1.07) (0.55) (2.76) (3.15) (2.20) (0.38)State Conserv -0.639 0.184 -0.066 0.752 -0.002 -0.021 -0.004 0.037

(-1.05) (0.07) (-0.03) (0.45) (-0.38) (-1.40) (-0.18) (1.00)

Lev -1.532*** -5.536*** -4.112 -3.230 -0.804*** -2.060*** -1.872*** -1.779***

(-3.78) (-7.37) (-1.50) (-1.47) (-21.53) (-8.56) (-11.94) (-9.53)

V 0.062* 0.294 0.100 0.025 0.078** 0.373*** 0.129 0.093(1.72) (0.66) (0.47) (0.14) (2.26) (4.52) (0.62) (0.54)

CV 0.045* 0.141* 0.082 0.118 0.045* 0.160** 0.093 0.159(1.89) (1.93) (0.89) (0.95) (1.88) (2.18) (0.94) (1.21)

CF 0.430*** 2.155*** 1.490*** 2.007*** 0.394*** 2.029*** 1.415*** 1.938***

(5.10) (20.15) (4.84) (13.68) (3.58) (6.26) (4.85) (18.63)

ROE 0.013*** 0.048*** 0.028*** 0.030*** 0.016*** 0.060*** 0.033*** 0.041***

(26.29) (27.53) (7.07) (6.08) (36.58) (40.29) (6.59) (5.03)Manown 0.191*** 0.440*** 0.349* 0.080 0.186*** 0.410*** 0.333* 0.036

(5.01) (3.60) (1.76) (0.32) (5.07) (3.48) (1.68) (0.14)

Table 10 Other Conservatism Measures (continued)

VariablesCscore M/B

Payout Yield OverPay OverYield Payout Yield OverPay OverYield

Age -0.021*** -0.002 -0.029** -0.040*** -0.023*** -0.011** -0.033** -0.051***

(-12.90) (-0.48) (-2.45) (-4.57) (-13.41) (-2.22) (-2.56) (-5.27)

Size 0.103*** 0.336*** 0.280 0.385* 0.131*** 0.497*** 0.404*** 0.396***

(2.88) (4.49) (1.16) (1.90) (16.48) (17.14) (9.14) (9.24)

Predividend 0.550*** 0.731*** 1.282*** 0.544*** 0.548*** 0.714*** 1.280*** 0.531***

(18.65) (31.39) (11.30) (15.56) (30.61) (31.90) (11.17) (13.33)

Stockdiv 0.043*** 0.170*** -0.133 -0.033 0.041*** 0.164*** -0.135 -0.031

(3.86) (4.56) (-1.24) (-0.35) (3.76) (4.49) (-1.28) (-0.33)

Inds Control Control Control Control Control Control Control Control

Obs. 4458 4458 4458 4458 4458 4458 4458 4458Pseudo R2 0.2869 0.2434 0.2932 0.2932 0.2919 0.2472 0.2966 0.3636

Table 11 Endogenous Issue

Variables Conserv Div Conserv Payout Conserv Yield Conserv Cashdiv/Asset

Conserv -1.380*** -0.516*** -1.806*** -0.019***

(-7.53) (-4.35) (-4.62) (-3.71)

State 0.021*** -0.041 0.020*** -0.003 0.020*** -0.064 0.019*** -0.001(3.01) (-1.63) (2.96) (-0.19) (2.85) (-1.14) (2.83) (-0.77)

State* Conserv 0.124*** 0.045* 0.166** 0.002*

(3.20) (1.77) (1.95) (1.67)Predividend -0.051 0.351 -0.017 0.314 0.002 0.611 -0.589 0.473

(-8.44)*** (21.50)*** (-1.99)** (22.97)*** (0.70) (38.42)*** (-3.37)*** (37.34)***

Lev 0.120 -0.167 0.143 -0.234 0.153 -0.157 0.133 -0.010

(7.24)*** (-3.77)*** (8.60)*** (-7.64)*** (9.27)*** (-1.56) (7.75)*** (-7.73)***

V -0.049 0.028 -0.056 0.060 -0.058 0.292 -0.049 0.006

(-2.69)*** (0.65) (-3.02)*** (2.06)** (-3.11)*** (3.04)*** (-2.64)** (5.13)***

CV 0.032 0.027 0.050 0.001(1.21) (1.52) (0.83) (0.34)

CF 1.377 0.588 2.391 0.039(7.88)*** (5.22)*** (6.39)*** (7.79)***

Table 11 Endogenous Issue (continued)

Variables Conserv Div Conserv Payout Conserv Yield Conserv Cashdiv/AssetROE -0.001 -0.001 -0.001 -0.001

(-8.21)***

(-9.16)*** (-9.23)*** (-9.16)***

Manown -2.090 14.177 -2.430 9.120 -2.666 8.569 -2.303 0.323(-0.94) (2.76)*** (-1.08) (2.64)** (-1.19) (0.75) (-1.03) (2.11)**

Age -0.001 -0.002 0.041 0.0002(-0.53) (-1.47) (7.57)*** (2.27)**

Size 0.005 0.080 -0.002 0.042 -0.004 0.201 -0.002 0.001

(1.56) (10.34)*** (-0.80) (7.99)*** (-1.30)(11.15)**

*(-0.53) (6.46)***

Stockdiv 0.123 -0.036 -0.065 -0.0003(5.80)*** (-2.45)** (-1.35) (-0.45)

Grow -0.015 -0.009 -0.013 -0.010(-1.95)** (-1.07) (-1.67)* (-1.77)*

Growsq 0.006 0.006 0.007 0.006(3.29)**

*(2.93)*** (3.28)*** (2.99)***

Inds Control Control Control Control4458 4458 4458 4458 4458 4458 4458 4458

Pseudo R2

0.0918 0.2542 0.0785 0.2322 0.0775 0.4076 0.0801 0.4352

Table 12 Endogenous Issue

Variables Conserv OverPay Conserv OverYield

Conserv -1.120 -1.127(-6.25)*** (-6.54)***

State 0.020 -0.006 0.019 -0.014(2.87)*** (-0.23) (2.79)*** (-0.56)

State Conserv 0.085 0.082(2.20)** (2.20)**

Predividend -0.017 0.426 0.002 0.169(-2.04)** (20.64)*** (0.59) (24.12)***

Lev 0.146 -0.242 0.156 -0.175(8.76)*** (-5.23)*** (9.44)*** (-3.93)***

V -0.055 0.030 -0.063 -0.027(-2.96)*** (0.69) (-3.39)*** (-0.65)

CV 0.025 0.021(0.95) (0.82)

CF 1.185 1.157(6.98)*** (7.04)***

ROE -0.001 -0.001(-9.10)*** (-8.97)***

Manown -2.386712 10.30222 -2.483 1.805(-1.06) (1.97)** (-1.11) (0.36)

Table 12 Endogenous Issue (continued)

Variables Conserv OverPay Conserv OverYield

Age 0.0000695 -0.001

(0.03) (-0.67)

Size -0.0026829 0.0982627 -0.004 0.079

(-0.85) (12.28)*** (-1.48) (10.02)***

Stockdiv -0.0385179 -0.003

(-1.74)* (-0.18)

Grow -0.0121517 -0.016

(-1.46) (-2.00)**

Growsq 0.006721 0.007

(3.23)*** (3.74)***

Inds Control Control

4458 4458 4458 4458

Pseudo R2 0.0784 0.1950 0.0770 0.2165