• Journal of Korea Technology Innovation Society
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• v.12 no.4
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• pp.687-714
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• 2009

In this paper, we study empirically the relations between financial constraints and dividend adjustment speed of innovative small and medium sized enterprises (SMEs) listed on Kosdaq Market of Korea Exchange. The main results of this study can be summarized as follows. Determinants suggested by the major theories of dividends, namely, residual dividend theory, dividend signaling theory, agency theory, catering theory, and transactions cost theory explain significantly the dividend payout policy of Kosdaq SMEs. Lintner's dividend adjustment model indicates that Kosdaq SMEs have long run target payout ratio, and that Kosdaq SMEs adjust partially the gap between actual and target payout ratio each year. In the core variables of Lintner (1956) dividend adjustment model, past DPS has more effect than current EPS. These results suggest that Kosdaq SMEs maintain stable dividend policy which maintain past DPS level without corporate special reasons. Dividend adjustment speed of innovative Kosdaq SMEs is more fast than that of uninnovative Kosdaq SMEs, and dividend adjustment speed of financial unconstrained innovative Kosdaq SMEs is faster than that of financial constrained innovative Kosdaq SMEs. Futhermore, dividend adjustment speed of innovative Kosdaq SMEs classified by Small and Medium Business Administration is faster than that of unclassified innovative Kosdaq SMEs. The former is linked with financial policies and services like credit guaranteed service, venture investment fund, insurance program, and so on. In conclusion, past DPS and current EPS suggested by the Lintner's dividend adjustment model explain mainly dividend adjustment speed, and financial constraints explain also partially. Therefore, if managers of innovative Kosdaq SMEs can properly understand of the effects of financial constraints on dividend smoothing, they can maintain constantly dividend policy. This is encouraging result for Korea government as it has implemented many policies to commit to innovative Kosdaq SMEs.

• Korean small business review
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• v.31 no.4
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• pp.67-93
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• 2009

The purpose of this paper is to explore the relations between financial constraints and dividend smoothing of innovative small and medium sized enterprises(SMEs) listed on Korea Securities Market and Kosdaq Market of Korea Exchange. The innovative SMEs is defined as the firms with high level of R&D intensity which is measured by (R&D investment/total sales) ratio, according to Chauvin and Hirschey (1993). The R&D investment plays an important role as the innovative driver that can increase the future growth opportunity and profitability of the firms. Therefore, the R&D investment have large, positive, and consistent influences on the market value of the firm. In this point of view, we expect that the innovative SMEs can adjust dividend payment faster than the noninnovative SMEs, on the ground of their future growth opportunity and profitability. And also, we expect that the financial unconstrained firms can adjust dividend payment faster than the financial constrained firms, on the ground of their financing ability of investment funds through the market accessibility. Aivazian et al.(2006) exert that the financial unconstrained firms with the high accessibility to capital market can adjust dividend payment faster than the financial constrained firms. We collect the sample firms among the total SMEs listed on Korea Securities Market and Kosdaq Market of Korea Exchange during the periods from January 1999 to December 2007 from the KIS Value Library database. The total number of firm-year observations of the total sample firms throughout the entire period is 5,544, the number of firm-year observations of the dividend firms is 2,919, and the number of firm-year observations of the non-dividend firms is 2,625. About 53%(or 2,919) of these total 5,544 observations involve firms that make a dividend payment. The dividend firms are divided into two groups according to the R&D intensity, such as the innovative SMEs with larger than median of R&D intensity and the noninnovative SMEs with smaller than median of R&D intensity. The number of firm-year observations of the innovative SMEs is 1,506, and the number of firm-year observations of the noninnovative SMEs is 1,413. Furthermore, the innovative SMEs are divided into two groups according to level of financial constraints, such as the financial unconstrained firms and the financial constrained firms. The number of firm-year observations of the former is 894, and the number of firm-year observations of the latter is 612. Although all available firm-year observations of the dividend firms are collected, deletions are made in the case of financial industries such as banks, securities company, insurance company, and other financial services company, because their capital structure and business style are widely different from the general manufacturing firms. The stock repurchase was involved in dividend payment because Grullon and Michaely (2002) examined the substitution hypothesis between dividends and stock repurchases. However, our data structure is an unbalanced panel data since there is no requirement that the firm-year observations data are all available for each firms during the entire periods from January 1999 to December 2007 from the KIS Value Library database. We firstly estimate the classic Lintner(1956) dividend adjustment model, where the decision to smooth dividend or to adopt a residual dividend policy depends on financial constraints measured by market accessibility. Lintner model indicates that firms maintain stable and long run target payout ratio, and that firms adjust partially the gap between current payout rato and target payout ratio each year. In the Lintner model, dependent variable is the current dividend per share(DPS_t), and independent variables are the past dividend per share(DPS_t-1) and the current earnings per share(EPS_t). We hypothesized that firms adjust partially the gap between the current dividend per share(DPS_t) and the target payout ratio(Ω) each year, when the past dividend per share(DPS_t-1) deviate from the target payout ratio(Ω). We secondly estimate the expansion model that extend the Lintner model by including the determinants suggested by the major theories of dividend, namely, residual dividend theory, dividend signaling theory, agency theory, catering theory, and transactions cost theory. In the expansion model, dependent variable is the current dividend per share(DPS_t), explanatory variables are the past dividend per share(DPS_t-1) and the current earnings per share(EPS_t), and control variables are the current capital expenditure ratio(CEA_t), the current leverage ratio(LEV_t), the current operating return on assets(ROA_t), the current business risk(RISK_t), the current trading volume turnover ratio(TURN_t), and the current dividend premium(DPREM_t). In these control variables, CEA_t, LEV_t, and ROA_t are the determinants suggested by the residual dividend theory and the agency theory, ROA_t and RISK_t are the determinants suggested by the dividend signaling theory, TURN_t is the determinant suggested by the transactions cost theory, and DPREM_t is the determinant suggested by the catering theory. Furthermore, we thirdly estimate the Lintner model and the expansion model by using the panel data of the financial unconstrained firms and the financial constrained firms, that are divided into two groups according to level of financial constraints. We expect that the financial unconstrained firms can adjust dividend payment faster than the financial constrained firms, because the former can finance more easily the investment funds through the market accessibility than the latter. We analyzed descriptive statistics such as mean, standard deviation, and median to delete the outliers from the panel data, conducted one way analysis of variance to check up the industry-specfic effects, and conducted difference test of firms characteristic variables between innovative SMEs and noninnovative SMEs as well as difference test of firms characteristic variables between financial unconstrained firms and financial constrained firms. We also conducted the correlation analysis and the variance inflation factors analysis to detect any multicollinearity among the independent variables. Both of the correlation coefficients and the variance inflation factors are roughly low to the extent that may be ignored the multicollinearity among the independent variables. Furthermore, we estimate both of the Lintner model and the expansion model using the panel regression analysis. We firstly test the time-specific effects and the firm-specific effects may be involved in our panel data through the Lagrange multiplier test that was proposed by Breusch and Pagan(1980), and secondly conduct Hausman test to prove that fixed effect model is fitter with our panel data than the random effect model. The main results of this study can be summarized as follows. The determinants suggested by the major theories of dividend, namely, residual dividend theory, dividend signaling theory, agency theory, catering theory, and transactions cost theory explain significantly the dividend policy of the innovative SMEs. Lintner model indicates that firms maintain stable and long run target payout ratio, and that firms adjust partially the gap between the current payout ratio and the target payout ratio each year. In the core variables of Lintner model, the past dividend per share has more effects to dividend smoothing than the current earnings per share. These results suggest that the innovative SMEs maintain stable and long run dividend policy which sustains the past dividend per share level without corporate special reasons. The main results show that dividend adjustment speed of the innovative SMEs is faster than that of the noninnovative SMEs. This means that the innovative SMEs with high level of R&D intensity can adjust dividend payment faster than the noninnovative SMEs, on the ground of their future growth opportunity and profitability. The other main results show that dividend adjustment speed of the financial unconstrained SMEs is faster than that of the financial constrained SMEs. This means that the financial unconstrained firms with high accessibility to capital market can adjust dividend payment faster than the financial constrained firms, on the ground of their financing ability of investment funds through the market accessibility. Futhermore, the other additional results show that dividend adjustment speed of the innovative SMEs classified by the Small and Medium Business Administration is faster than that of the unclassified SMEs. They are linked with various financial policies and services such as credit guaranteed service, policy fund for SMEs, venture investment fund, insurance program, and so on. In conclusion, the past dividend per share and the current earnings per share suggested by the Lintner model explain mainly dividend adjustment speed of the innovative SMEs, and also the financial constraints explain partially. Therefore, if managers can properly understand of the relations between financial constraints and dividend smoothing of innovative SMEs, they can maintain stable and long run dividend policy of the innovative SMEs through dividend smoothing. These are encouraging results for Korea government, that is, the Small and Medium Business Administration as it has implemented many policies to commit to the innovative SMEs. This paper may have a few limitations because it may be only early study about the relations between financial constraints and dividend smoothing of the innovative SMEs. Specifically, this paper may not adequately capture all of the subtle features of the innovative SMEs and the financial unconstrained SMEs. Therefore, we think that it is necessary to expand sample firms and control variables, and use more elaborate analysis methods in the future studies.

• The Journal of Asian Finance, Economics and Business
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• v.6 no.2
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• pp.173-181
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• 2019

The paper aims to evaluate the combination of strategies that influence the success of New Technology Based Firms (NTBFs) located in isolated areas with resource constraints. We utilize the Kauffman Firm Survey to construct a subset of 224 firms operating in primary metal manufacturing industries and who are located in non-thriving areas. We focus on the impact of technological strategy, in the form of Inward Technology Licensing (ITL), combined with financial strategy, in the form of increased financial slack. Using a negative binomial-specification technique to model these relations, we find that ITL positively impacts internal innovation in the firm and this relation is strengthened by the presence of greater financial slack. This positive impact of financial slack supports the behavioral theory of the firm rather than agency theory in that financial slack enables further innovation rather than stifling it. This research confirms the importance of resource acquisition, suggesting that entrepreneurs may utilize external sources of knowledge in an effort to build a favorable situation when facing the challenges of location. Finally, by presenting evidence showing the compatibility of a financial strategy with a knowledge strategy (ITL), this study emphasizes the importance to entrepreneurs of choosing the proper combination of varying strategies.

• Journal of Korea Technology Innovation Society
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• v.12 no.2
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• pp.360-387
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• 2009

In this paper, we analyse empirically the effects of internal financing on investment of innovative small and medium sized enterprises listed on Kosdaq Market of Korea Exchange. The main results of this study can be summarized as follows. Free cash flows by proxy variables of internal financing have the significant effects on R&D investment as well as fixed asset investment. Internal financing has much more effects on R&D investment of general enterprises listed on Kosdaq Market than that of venture enterprises listed on Kosdaq Market, and on R&D investment of innovative enterprises than that of non-innovative enterprises. Internal financing has more effects on asset-counted R&D investment than cost-counted R&D investment. Asset-counted R&D investment is counted in intangible assets on Balance Sheet, and cost-counted R&D investment is counted in cost on Income Statement. Internal financing has more effects on R&D investment of financial constrained enterprises than that of financial unconstrained enterprises. Financial constraints is measured by credit ratings. Faulkender and Smith (2007) emphasize that low credit ratings enterprises are more likely to face financial constraints, and they rely largely on internal financing.

• Asian Journal of Business Environment
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• v.9 no.1
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• pp.21-28
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• 2019

Purpose - The purpose of this paper is to investigate the relationship between corporate social responsibility disclosure (CSRD) and investment-cash flow sensitivity, which is a surrogate for financing constraints. Research design, data, and methodology - Taking China's A-share listed companies between 2009 and 2016 as a sample, this paper empirically tests the relationship between CSRD and investment-cash flow sensitivity by Panel VAR model. By introducing the orthogonal impulse response function, this paper distinguishes the fundamental factors and financial ones that affect corporate investment behavior. Results - Findings indicate that: (1) investment-cash flow sensitivity of firms with low level of CSRD is significantly lower than that of firms with high level of CSRD; (2) the orthogonal impulse response of corporate investment to cash flow in firms with high level of CSRD is significantly different from zero, but it is not significant in firms with low level of CSRD; (3) for firms with low level of CSRD, 0.7% of corporate investment volatility can be explained by the change in cash flow, which is lower than that of firms with high level of CSRD (1.1%). Conclusions - Corporations disclosing more and higher quality CSRD are often those faced with financing constraints. Voluntary disclosure can help them alleviate information asymmetry and financing constraints.

• Management Science and Financial Engineering
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• v.12 no.1
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• pp.95-112
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• 2006

Disassembly scheduling is the problem of determining the quantity and timing of disassembling used or end-of-life products while satisfying the demand of their parts and/or components over a planning horizon. The case of assembly product structure is considered while the resource capacity constraints are explicitly considered. A cost-based objective is considered that minimizes the sum of disassembly operation and inventory holding costs. The problem is formulated as an integer programming model, and a two-stage heuristic with construction and improvement algorithms is suggested in this paper. To test the performance of the heuristic, computational experiments are done on randomly generated problems, and the results show that the heuristic gives near optimal solutions within a very short amount of computation time.

• The Korean Journal of Applied Statistics
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• v.24 no.4
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• pp.721-733
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• 2011

We consider the state price densities that are implicit in financial asset prices. In the pricing of an option, the state price density is proportional to the second derivative of the option pricing function and this relationship together with no arbitrage principle imposes restrictions on the pricing function such as monotonicity and convexity. Since the state price density is a proper density function and most of the shape constraints are caused by this, we propose to estimate the state price density directly by specifying candidate densities in a flexible nonparametric way and applying methods of regularization under extra constraints. The problem is easy to solve and the resulting state price density estimates satisfy all the restrictions required by economic theory.

• Journal of the Korean Mathematical Society
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• v.44 no.1
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• pp.139-150
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• 2007

We investigate an optimal portfolio selection problem with transaction costs when an illiquid asset pays cash dividends and there are constraints on the illiquid asset holding. We provide closed form solutions for the problem, and by using these solutions we illustrate interesting features of optimal policies.

• Journal of the Korea Institute of Information Security & Cryptology
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• v.28 no.3
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• pp.743-763
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• 2018

It has been 10 years since the concept of cloud system has emerged. Despite the fact that the cost-effectiveness and security of cloud systems has been proven, financial companies are reluctant to adopt cloud systems. Financial institutions are reluctant to adopt the cloud system because of the strong regulation of financial authorities in relation to the leakage of customer information However, more important reason why financial institutions hesitate to introduce cloud systems is the lack of direction and standards for the introduction of cloud systems by financial institutions. This study examines the legal and institutional constraints on the introduction of cloud systems in financial institutions and suggests decision models for determining whether cloud systems can be applied and how cloud systems are configured when financial institutions construct IT systems. We hope that this research will be helpful for establishing direction of cloud system introduction of many financial institutions.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.7
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• pp.35-47
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• 2020

An economic downturn can occurred through unexpected events in various fields, such as the subprime mortgage crisis and the outbreak of Coronavirus Disease-2019 (COVID-19). Trade credit is important for small- and medium-sized enterprises (SMEs), especially during a monetary contraction, as it is the last option for firms that lack bank credit. This study aims to determine whether trade credit is profitable for the buyer and supplier firms during and after a financial crisis. We use panel data consisting of all trade credit transactions and financial statements of 5,751 Korean firms during the period 2008-2012. It shows that trade credit is more profitable for both buyers and suppliers in the post-crisis period than during the crisis. Moreover, trade payable is more effective for unconstrained buyers than for constrained buyers. Finally, a mixed strategy is superior to an aggressive or passive strategy of SMEs. The results suggest less profitability of trade credit during a period of contraction and greater sensitivity of the buyer SMEs, emphasizing the idiosyncratic liquidity strategy of each firm. This study can be helpful to develop a strategy of profitable trade credit for SMEs and to establish a policy of managing liquidity for the authority.