Managerial entrenchment and the value of dividends

Managerial entrenchment and the value of dividends This study examines the effects of takeover defenses on the value implication of dividends. Using the framework of Fama and French in J Finance 53(3): 819–843 (1998), the paper shows that dividends paid by managers with strong managerial power resulting from takeover protection measures are more valued in the stock market. The results are consistent with the hypothesis of the agency costs of free cash flow built on by Jensen in Am Econ Rev 76(2): 323–329 (1986) in the sense that dividends are important to determine firm value by reducing the free cash flow that would otherwise be deployed for private benefits by entrenched managers. This paper also examines whether the incremental value effect of dividends in entrenched firms is attributable to a numerator effect (changes in the future cash flow) or a denominator effect (changes in the discount rate). The empirical results show that the dividend payout of such firms is more positively related to future performance and more negatively related to information risk, which supports both numerator and denominator effects. Review of Quantitative Finance and Accounting Springer Journals

Managerial entrenchment and the value of dividends

Loading next page...
Springer US
Copyright © 2010 by Springer Science+Business Media, LLC
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
Publisher site
See Article on Publisher Site


You’re reading a free preview. Subscribe to read the entire article.

DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

Monthly Plan

  • Read unlimited articles
  • Personalized recommendations
  • No expiration
  • Print 20 pages per month
  • 20% off on PDF purchases
  • Organize your research
  • Get updates on your journals and topic searches


Start Free Trial

14-day Free Trial

Best Deal — 39% off

Annual Plan

  • All the features of the Professional Plan, but for 39% off!
  • Billed annually
  • No expiration
  • For the normal price of 10 articles elsewhere, you get one full year of unlimited access to articles.



billed annually
Start Free Trial

14-day Free Trial