We examine the role of carbon risk in dividend policy, and how its effect varies between imputation (paying franked dividends) and classical (paying unfranked dividends) tax environments in the unique experimental setting in Australia. We find that the probability of paying dividend and dividend payout ratio is lower for firms in the highest-emitting industries (polluters) relative to non-polluters, subsequent to ratification of the Kyoto Protocol. While the post-Kyoto reduction in the likelihood of paying dividend is not significantly different, the reduction in payout ratio is smaller in the imputation environment than classical tax system, highlighting the significance of imputation tax environment only on the impact of carbon risk on dividend payout rather than decision to pay. We further document that the post-Kyoto reduction in dividend payout of polluters is driven by their relative increase in earnings uncertainty. The evidence suggests a causal influence of carbon risk on firm dividend policy.

Rights offerings in Australia provide valuable choices to the issuer in terms of both underwriting and renounceability. We formulate a set of hypotheses from a quality-signaling perspective, affording an analysis of the key interrelations between quality, underwriting status, renounceability, takeup, and subscription price discount. We analyse rights offerings from two perspectives: market reaction to rights announcements and identification of the factors driving the choice of issue type. Evidence strongly supports the relation between quality signals and issue type. Using a robustly constructed takeup variable, we establish empirical relations between takeup, underwriting status, and renounceability that differ significantly from those previously reported, but which are consistent with the hypotheses developed in this paper.

We find that powerful chief executive officers (CEOs) are associated with higher crash risk. The positive association between CEO power and crash risk holds when controlling for earnings management, tax avoidance, chief executive officer's option incentives, and CEO overconfidence. Firms with powerful CEOs have higher probability of financial restatements, lower proportion of negative to positive earnings guidance, and lower ratio of negative to positive words in their financial statements. The association between powerful CEOs and higher crash risk is mostly evident among firms with higher sensitivity of CEO wealth to stock prices and when CEOs have lower general skills. External monitoring mechanisms weaken but do not eliminate the association between powerful founder CEOs and higher crash risk.

Australian companies pay dividends semi-annually with smaller “interim” payments and larger “final” payments. Interim dividends are declared and paid within a less full information environment than final dividends. We analyze the interactions between the timing of dividends and their information content, controlling for share repurchase and tax effects. Dividend reductions that are not associated with share repurchases are statistically significantly related to future abnormal earnings and provide strong support for the information content of dividend reductions. The percentage of dividend reduction is stronger for interim than for final dividend reductions. The market reaction is negatively related to the reduction in imputation tax credit and reacts more aggressively and negatively to interim as compared to final dividend reductions.

We exploit the staggered initiation of merger and acquisition (M&A) laws across countries as a plausibly exogenous shock to the threat of takeover to examine whether the market for corporate control has a real effect on firm-level stock price crash risk. Using a difference-in-differences regression on a large sample of firms from 32 countries, we find that stock price crash risk significantly decreases following the passage of M&A laws. This effect is stronger for firms domiciled in countries with poorer investor protection and information environments and for firms with weaker firm-level governance. Further, financial reporting opacity and overinvestment significantly decrease in the post-M&A law periods. Our study suggests that an active takeover market has a disciplining effect on managerial bad news hoarding and leads to lower future crash risk.