Does foreign currency-denominated debt affect dividend payout policy? Evidence from Korea

Journal of Multinational Financial Management

Volumn 49, Issue , 2019, Pages 20-34

  Choi, Young Mok ^a   Park, Kunsu ^b  

^a Chongju University   (South Korea)

^b KIMEP UNIVERSITY   (Kazakhstan)

Author keywords

Debt financing costs; Dividend policy; Foreign currency denominated debt; Hedging

Indexed keywords

EID: 85061967897     PISSN: 1042444X     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.mulfin.2019.02.001     Document Type: Article

References (46)

1. Aabo, T., Hansen, M.A., Muradoglu, Y.G., Foreign debt usage in non-financial firms: a horse race between operating and accounting exposure hedging. Eur. Finan. Manage. 21:3 (2015), 590–611.
2. Allayannis, G., Ofek, E., Exchange rate exposure, hedging, and the use of foreign currency derivatives. J. Int. Money Finan. 20:2 (2001), 273–296.
3. Allayannis, G., Brown, G.W., Klapper, L.F., Capital structure and financial risk: evidence from foreign debt use in East Asia. J. Finan. 58:6 (2003), 2667–2710.
4. Allen, F., Michaely, R., Payout policy. Constantinides, G.M., Harris, M., Stulz, R., (eds.) Handbook of the Economics of Finance, vol. 1A, ed, 2003, North-Holland, Amsterdam.
5. Altman, E., Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. J. Finan. 23:4 (1968), 589–609.
6. Ashbaugh-Skaife, H., Collins, D.W., LaFond, R., The effects of corporate governance on firms’ credit ratings. J. Acc. Econ. 42:1–2 (2006), 203–243.
7. Baker, M., Wurgler, J., A catering theory of dividends. J. Finan. 59:3 (2004), 1125–1165.
8. Baker, M., Wurgler, J., Appearing and disappearing dividends: the link to catering incentives. J. Finan. Econ. 73:2 (2004), 271–288.
9. Banerjee, S., Gatchev, V.A., Spindt, P.A., Stock market liquidity and firm dividend policy. J. Finan. Quant. Anal. 42:2 (2007), 369–397.
10. Bartram, S.M., Brown, G.W., Minton, B.A., Resolving the exposure puzzle: the many facets of exchange rate exposure. J. Finan. Econ. 95:2 (2010), 148–173.
11. Bordo, M.D., Meissner, C.M., The role of foreign currency debt in financial crises: 1880–1913 versus 1972–1997. J. Bank. Finan. 30:12 (2006), 3299–3329.
12. Brockman, P., Unlu, E., Dividend policy, creditor rights, and the agency costs of debt. J. Finan. Econ. 92:2 (2009), 276–299.
13. Brown, M., Ongena, S., Yeşin, P., Foreign currency borrowing by small firms in the transition economies. J. Finan. Intermed. 20:3 (2011), 285–302.
14. Chay, J.B., Suh, J., Payout policy and cash-flow uncertainty. J. Finan. Econ. 93:1 (2009), 88–107.
15. Clark, E., Judge, A., The determinants of foreign currency hedging: does foreign currency debt induce a bias?. Eur. Finan. Manage. 14:3 (2008), 445–469.
16. DeAngelo, H., DeAngelo, L., Stulz, R.M., Dividend policy and the earned/contributed capital mix: a test of the life-cycle theory. J. Finan. Econ. 81:2 (2006), 227–254.
17. Faccio, M., Lang, L.H.P., Young, L., Dividends and expropriation. Am. Econ. Rev. 91:1 (2001), 54–78.
18. Fama, E.F., French, K.R., The cross section of expected returns. J. Finan. 47:2 (1992), 427–465.
19. Fama, E.F., French, K.R., Disappearing dividends: changing firm characteristics or lower propensity to pay?. J. Finan. Econ. 60:1 (2001), 3–43.
20. Fazzari, S.M., Hubbard, R.G., Petersen, B.C., Blinder, A.S., Poterba, J.M., Financing constraints and corporate investment. Brookings Pap. Econ. Activity 1 (1988), 141–206.
21. Fenn, G.W., Liang, N., Corporate payout policy and managerial stock incentives. J. Finan. Econ. 60:1 (2001), 45–72.
22. Francis, J., LaFond, R., Olsson, P., Schipper, K., The marketing pricing of accruals quality. J. Acc. Econ. 39:2 (2005), 295–327.
23. Géczy, C., Minton, B.A., Schrand, C., Why firms use currency derivatives. J. Finan. 52:4 (1997), 1323–1354.
24. Goswami, G., Shrikhande, M.M., Economic exposure and debt financing choice. J. Multinatl. Finan. Manage. 11:1 (2001), 39–58.
25. Gray, P., Koh, P.-S., Tong, Y.H., Accruals quality, information risk and cost of capital: evidence from Australia. J. Bus. Finan. Acc. 36:1–2 (2009), 51–72.
26. Grullon, G., Michaely, R., Swaminathan, B., Are dividend changes a sign of firm maturity?. J. Bus. 75:3 (2002), 387–424.
27. Jensen, G.R., Solberg, D.P., Zorn, T.S., Simultaneous determination of insider ownership, debt and dividend policies. J. Finan. Quant. Anal. 27:2 (1992), 247–263.
28. Jensen, M.C., Agency costs of free cash flow, corporate finance, and takeovers. Am. Econ. Rev. 76:2 (1986), 323–329.
29. Jung, J., Herbohn, K., Clarkson, P., Carbon risk, carbon risk awareness and the cost of debt financing. J. Bus. Ethics 150:4 (2018), 1151–1171.
30. Kedia, S., Mozumdar, A., Foreign currency-denominated debt: an empirical examination. J. Bus. 76:4 (2003), 521–546.
31. Keloharju, M., Niskanen, M., Why do firms raise foreign currency denominated debt? Evidence from Finland. Eur. Finan. Manage. 7:4 (2001), 481–496.
32. Kennedy, P., A Guide to Econometrics. 5th ed., 2003, The MIT Press, Cambridge, MA.
33. La Porta, R., Lopez-de-Silanes, F., Shleifer, A., Vishny, R.W., Agency problems and dividend policies around the world. J. Finan. 55:1 (2000), 1–33.
34. Li, Y., Eddie, I., Liu, J., Carbon emissions and the cost of capital: Australian evidence. Rev. Acc. Finan. 13:4 (2014), 400–420.
35. McBrady, M.R., Schill, M.J., Foreign currency-denominated borrowing in the absence of operating incentives. J. Finan. Econ. 86:1 (2007), 145–177.
36. Michaely, R., Roberts, M.R., Corporate dividend policies: lessons from private firms. Rev. Finan. Stud. 25:3 (2012), 711–746.
37. Miller, M.H., Modigliani, F., Dividend policy, growth, and the valuation of shares. J. Bus. 34:4 (1961), 411–433.
38. Mora, N., Neaime, S., Aintablian, S., Foreign currency borrowing by small firms in emerging markets: when domestic banks intermediate dollars. J. Bank. Finan. 37:3 (2013), 1093–1107.
39. Mueller, D.C., A life cycle theory of the firm. J. Ind. Econ. 20:3 (1972), 199–219.
40. Nguyen, H., Faff, R., Foreign debt and financial hedging: evidence from Australia. Int. Rev. Econ. Finan. 15:2 (2006), 184–201.
41. Pittman, J.A., Fortin, S., Auditor choice and the cost of debt capital for newly public firms. J. Acc. Econ. 37:1 (2004), 113–136.
42. Shapiro, A.C., The impact of taxation on the currency-of-denomination decision for long-term foreign borrowing and lending. J. Int. Bus. Stud. 15:1 (1984), 15–25.
43. Shleifer, A., Vishny, R.W., Large shareholders and corporate control. J. Polit. Econ. 94:3 (1986), 461–488.
44. Smith, C.W., Watts, L., The investment opportunity set and corporate financing, dividend, and compensation policies. J. Finan. Econ. 32:3 (1992), 263–292.
45. Sufi, A., Bank lines of credit in corporate finance: an empirical analysis. Rev. Finan. Stud. 22:3 (2009), 1057–1088.
46. Von Eije, H., Megginson, W.L., Dividends and share repurchases in the European Union. J. Finan. Econ. 89:2 (2008), 347–374.