不完全信息股利政策和一鸟在手的谬论外文翻译可编辑Word下载.docx
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不完全信息股利政策和一鸟在手的谬论外文翻译可编辑Word下载.docx
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Imperfectinformation,dividendpolicy,and"
thebirdinthehand"
fallacy
MaterialSource:
TheBellJournalofEconomicAuthor:
SudiptoBhattacharya
Thispaperassumesthatoutsideinvestorshaveimperfectinformationaboutfirms'
profitabilityandthatcashdividendsaretaxedatahigherratethancapitalgains.Itisshownthatundertheseconditions,suchdividendsfunctionasasignalofexpectedcashflows.Bystructuringthemodelsothatfinite-livedinvestorsturnovercontinuingprojectstosucceedinggenerationsofinvestors,wederiveacomparativestaticresultthatrelatestheequilibriumlevelofdividendpayouttothelengthofinvestors'
planninghorizons.
Thisarticledevelopsamodelinwhichcashdividendsfunctionasasignalofexpectedcashflowsoffirmsinanimperfect-informationsetting.Weassumethattheproductiveassetsinwhichagentsinveststayinplacelongerthantheagentsliveandthatownershipoftheassetsistransferred,overtime,tootheragents.Thelatterareaprioriimperfectlyinformedabouttheprofitabilityofassetsheldbydifferentfirms.Themajorsignalingcoststhatleaddividendstofunctionassignalsarisebecausedividendsaretaxedattheordinaryincometaxrate,whereascapitalgainsaretaxedatalowerrate.Withinthisframework,thispaperexplainswhyfirmsmaypaydividendsdespitethetaxdisadvantageofdoingso.
Recently,LelandandPyle1977andRoss1977haveusedtheparadigmofSpence'
ssignalingmodel1974toexaminefinancialmarketphenomenarelatedtounsystematicriskbornebyentrepreneursandfirmdebt-equitychoicedecisions,respectively.Initsspiritandcoststructure,ourmodeliscloselyrelatedtotheRossmodel1977.Theessentialcontributionsofourmodelarethefollowing.First,wedevelopatax-basedsignalingcoststructurefoundedontheobservationthatsignalingequilibriaarefeasible,evenifsignalingcostelementsthatarenegativelyrelatedtotrueexpectedcashflowsaresmall,providedthereareothersignalingcoststhatarenotrelatedtotruecashflowlevels.Second,wedevelopthemodelinanintertemporalsettingthatallowsustoidentifytherelativeweightsplacedonthebenefitsincreaseinvalueandcostsofsignalingwithdividends.Ourmodelsuggestsaninterestingcomparativestaticresultconcerningtheshareholders'
planninghorizon;
namely,theshorterthehorizonsoverwhichshareholdershavetorealizetheirwealth,thehigheristheequilibriumproportionofdividendstoexpectedearnings.Othercomparativestaticpropertiesofthedividend-signalingequilibrium,withrespecttomajorvariableslikethepersonalincometaxrateandtherateofinterest,arealsodevelopedandareshowntobeinaccordwiththeempiricalresultsofBrittain1966.
Tokeeptheanalysismanageable,andtohighlighttheessentialcharacteristics,weemploytwomajoranalyticalsimplifications.First,weassumethatthevaluationofcashflowstreamsisdoneinarisk-neutralworld.Second,weallowthe"
urgency"
oftheagents'
needtorealizetheirwealthtobeparameterizedbythelengthoftheplanninghorizonsoverwhichtheyimizeexpecteddiscountedrealizedwealth,withnodetailedconsiderationoftheintertemporalpatternofassetdisposal.Theseassumptionsarefurtherdiscussedbelow,afterthebasicmodelisdeveloped.Thegeneralstructureofthedividend-signalingmodelandtheconditionsfortheexistenceofdividend-signalingequilibriaaredevelopedinSection2.InSection3weanalyzeanexamplewithuniformlydistributedcashflowstofacilitatediscussionofcomparativestaticpropertiesandissuesrelatedtomultiperiodplanninghorizonsanddynamiclearningpossibilities.Section4containstheconcludingremarksandsuggestionsforfurtherresearch.
Inthissectionweoutlinethenatureofthedividend-signalingmodelandthesignalingcoststructure.Themodelappliestoasettinginwhichoutsideinvestorscannotdistinguishaprioritheprofitabilityofproductiveassetsheldbyacrosssectionoffirms.Existingshareholdersoffirmscareaboutthemarketvalue"
assigned"
byoutsiders,becausetheplanninghorizonoverwhichtheyhavetorealizetheirwealthisshorterthanthetimespanoverwhichthefirms'
assetsgeneratecashflows.Thesimplifyingassumptionofrisk-neutralityeliminatesthediversificationmotive.TheusualnoncooperativeevolutionargumentsoftheSpence-type1974suggestasignalingequilibrium,ifasignalwiththeappropriatecost-structurepropertiesexists.Dividendsareshowntosatisfytherequirements.
Weignoretheincorporationofothersourcesofinformatione.g.,accountants'
reportsonthegroundthat,takenbythemselves,theyarefundamentallyunreliable"
screening"
mechanismsbecauseofthemoralhazardinvolvedincommunicatingprofitability.Hence,themodelofthispaperissomewhatexploratoryinnature,apropertythatitshareswithmostothersignalingmodelsinwhichthecostlinessofsignalsderivesfromexogenousconsideration.
Topreservethesimplicityofthemodel'
sstructure,weassumethatassetsownedbyfirmsgeneratecashflowsthatareperpetualstreams,whichare,inmostofwhatfollows,takentobeintertemporallyindependentlyidenticallydistributed.Inthissection,andformostofthepaper,weassumethatexistingshareholdershaveasingle-periodplanninghorizon.Thefirmsareassumedtohavesufficientinvestmentopportunities,sothatallofthecashflowsfromexistingassetscanberationallyreinvested.Thissimplifyingassumptioncanberelaxedsomewhat.Thecommunicationofevenexpostcashflowsfromexistingassetsisassumedtobecostly,becausecashpayoutsintheformofdividendsonregularsharerepurchasesareassumedtobetaxedatahigherpersonaltaxratethancapitalgains.Intheabsenceofexplicitcashpayout,beforetakingonoutsidefinancingfornewinvestments,expostcashflowscannotbecommunicatedwithoutmoralhazard,becauseoneofthe"
inside"
variablesthatafirmcannotreadilycommunicatewithoutmoralhazardisthelevelofnewinvestment.
ItisassumedthatthesignalingbenefitofdividendsderivesfromtheriseinliquidationvalueVDcausedbyacommitted,andactuallypaid,dividendlevelD.Wedevelopthemodelintermsofamarginalanalysisforanewprojecttakenonbyafirm.Thissimplificationservestwopurposes.First,notanalyzingdividenddecisionsvis-à
-visexistingandnewassetcashflowsenablesustopostponediscussionofdynamiclearningissuestotheexampleinSection3.Second,thismodeofanalysispermitsustoretainsimplicityandflexibilitywithrespecttothemodelingofcostsincurredinmakingupshortfallsofcashflowsrelativetopromiseddividends.Forexample,onewayofmakingupsuchshort-fallsislikelytobethepostponementofinvestment/replacementplans,althoughfundamentallyweadheretothesoundpartialequilibriumpracticeofanalyzingthedividenddecisionwhentheinvestmentpolicyisgiven.Itisassumedthatdividenddecisionsaretakenbyshareholders'
agents,whomweterminsidersormanagers.Theseagentsoptimizetheafter-taxobjectivefunctionofshareholders,possiblybecausetheirownincentivecompensationistiedtothesamecriterion.Theinsidersaretheonlypeoplewhoknowthecashflowdistributionsoftheirprojects.
Havingdiscussedthegeneralstructureofthemodelandthecoststhatpermitdividendstofunctionasasignal,wenowuseasimpleexampletoexamineinmoredetailthenatureofequilibriumanditscomparativestatics.Supposetheincrementalcashflowoftheprojectwhosevalueisbeingsignaledis,inanygivenperiod,distributeduniformlyover[0,t]withmeant/2.Allprojectsareperpetuitiesand,forthetimebeing,thecashflowsofeachprojectaretakentobeintertemporallyindependentlyidenticallydistributed.Inthecrosssectionoffirmsthevalueoftisassumedtovarybetweentminandt,butinvestorscannotdiscriminateamongprojectswithdifferentt'
sheldbydifferentfirms.Itisfurtherassumedthattmin0.Thisispartlyforanalyticalconveniencebut,vis-à
-visamarginalprojectinanygivenfirm,thisisanaturalassumptionsinceoneofthe"
variablesthatafirmcannotcostlesslycommunicatetothemarketwithoutmoralhazardistheamountofinvestmentitundertakes.Initially,wecontinuetoassumeshareholdershaveaone-periodplanninghorizon.
Thesignalingcoststructurethatwehavedevelopedisnotonlyrealisticdividendslinkedonlytoexpectedcashflows,butalsotheonlysimplestructureconsistentwiththeassumptionofanexogenouslycostlydividend-signalingequilibrium.Superficially,anothersimplepossibilitythatsatisfiesthemarginal-costcharacteristicsrequiredforsignalingisa"
lower-truncated"
structurewithcashflowXindividendspaidifandonlyifXislessthansome"
promised"
D!
SincethemoralhazardincostlesslycommunicatingXtooutsidersisthebasisforthedissipativesignalingequilibrium,thisisnotgoingtobeaveryenforceablestructure.InadifferentcontextRoss1977hasdevelopedafinancial-signalingmodelofleveragebasedona"
coststructureofsignificantbankruptcypenaltiesformanagers.Adifficultywithsuchastructureisthatunlessenforceablepenaltiesofsimilarmagnituderelativetothebenefitsofnonbankruptcyexistforshareholders,thereisanincentiveforshareholderstomakesidepaymentstomanagerstoinducefalsesignalingbyemployinghigherlevelsofdebt.InanotherpaperBhattacharya,1977,Ihavedevelopedamodelofnondissipative-notexogenouslycostly-signalingofinsiders'
informationaboutfuturecashflows,basedonexpectationsrevisioninthemarket,inaset
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