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What drives the disappearing dividends phenomenon?

What drives the disappearing dividends phenomenon?
What drives the disappearing dividends phenomenon?
We study the determinants of dividend payout policy and examine the role of liquidity, risk and catering in explaining the changes in propensity to pay. Our results indicate that risk plays a major role in firms’ dividend policy. The evidence substantiates from a large sample of firms representing 18 countries over the sample period from 1989 to 2011. For firms in the US, France, UK and Other European markets, liquidity is additionally an important determinant of dividend policy. We find that, although catering incentives persist only among firms in common law countries and not in civil law countries, after adjusting for risk there is little support for catering theory even among firms incorporated in common law countries. Our results indicate that catering incentives reflect the risk-reward relationship in the changing propensity to pay dividends.
catering, dividend payout policy, risk, liquidity, life-cycle effect
0378-4266
3499-3514
Kuo, Jing-Ming
4ded9336-66d1-4a13-bc34-5473e6532eb6
Philip, Dennis
bdd3e349-4819-4f08-8faa-5ef12cdbc06c
Zhang, Qingjing
af719b43-b76c-4d0e-ad41-ff58ebbc505d
Kuo, Jing-Ming
4ded9336-66d1-4a13-bc34-5473e6532eb6
Philip, Dennis
bdd3e349-4819-4f08-8faa-5ef12cdbc06c
Zhang, Qingjing
af719b43-b76c-4d0e-ad41-ff58ebbc505d

Kuo, Jing-Ming, Philip, Dennis and Zhang, Qingjing (2013) What drives the disappearing dividends phenomenon? Journal of Banking & Finance, 37 (9), 3499-3514. (doi:10.1016/j.jbankfin.2013.05.003).

Record type: Article

Abstract

We study the determinants of dividend payout policy and examine the role of liquidity, risk and catering in explaining the changes in propensity to pay. Our results indicate that risk plays a major role in firms’ dividend policy. The evidence substantiates from a large sample of firms representing 18 countries over the sample period from 1989 to 2011. For firms in the US, France, UK and Other European markets, liquidity is additionally an important determinant of dividend policy. We find that, although catering incentives persist only among firms in common law countries and not in civil law countries, after adjusting for risk there is little support for catering theory even among firms incorporated in common law countries. Our results indicate that catering incentives reflect the risk-reward relationship in the changing propensity to pay dividends.

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More information

Accepted/In Press date: 3 May 2013
e-pub ahead of print date: 15 May 2013
Published date: September 2013
Keywords: catering, dividend payout policy, risk, liquidity, life-cycle effect
Organisations: Southampton Business School

Identifiers

Local EPrints ID: 357059
URI: http://eprints.soton.ac.uk/id/eprint/357059
ISSN: 0378-4266
PURE UUID: 7b0d9aab-1e1f-47f3-be1c-8c0ff6ae9a9b

Catalogue record

Date deposited: 25 Sep 2013 09:45
Last modified: 14 Mar 2024 14:54

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Contributors

Author: Jing-Ming Kuo
Author: Dennis Philip
Author: Qingjing Zhang

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