Advanced Search
MyIDEAS: Login to save this article or follow this journal

Profits of horizontally interrelated firms with dividend obligations

Contents:

Author Info

  • Umed Temurshoev

Abstract

Purpose – The purpose of this paper is to solve the problem of overestimation of industry profits due to the presence of cross-shareholding (CS) links among firms that is inherent to the profit formulations in existing literature. Design/methodology/approach – In proposing a new profits specification, we explicitly distinguish between firms' profits (retained earnings) and their external shareholders' returns. Matrix algebra is used to take into full account both direct and indirect financial interests of firms in each other. Findings – Compared to no the CS case, with CS firms' industry-wide retained earnings increase, while aggregate external shareholders' returns decrease unless dividend ratios are all unity. It is shown that qualitatively there is no difference in the outcomes of all profit specifications, whereas there is a quantitative difference. Research limitations/implications – The pattern of CS is taken as exogenous, which looks at the problem from an antitrust perspective. Endogenizing the structure of CS is left for future research. Practical implications – Firms have incentives to engage in CS links, since they can only benefit from it. In empirical research (e.g. analyzing market performance) dividend payments have to be taken into account if there are extensive CS links present in the industry under study. Originality/value – This paper extends the existing profit formulations by including both income inflows and outflows of firms due to CS links. Furthermore, the significance of considering dividend payments for empirical research is discussed.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.emeraldinsight.com/Insight/viewContentItem.do;jsessionid=329E71513C1EA3A54DEC90AA65C2AC33?contentType=Article&contentId=1805957
Download Restriction: Cannot be freely downloaded

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Emerald Group Publishing in its journal Journal of Economic Studies.

Volume (Year): 36 (2009)
Issue (Month): 3 (September)
Pages: 296-306

as in new window
Handle: RePEc:eme:jespps:v:36:y:2009:i:3:p:296-306

Contact details of provider:
Web page: http://www.emeraldinsight.com

Order Information:
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Email:
Web: http://www.emeraldinsight.com/jes.htm

Related research

Keywords: Dividends; Profit; Shares;

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eme:jespps:v:36:y:2009:i:3:p:296-306. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.