An International Analysis of Dividend Payment Behavior

Stephen P. Ferris · Nilanjan Sen · Emre Unlu

51 citations0/0 files storedJournal of Business Finance &amp Accounting

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Corporate Finance and Governance Financial Markets and Investment Strategies Corporate Taxation and Avoidance

Abstract

Abstract: This study investigates patterns in dividend payment across nine common law and sixteen civil law countries over 1994‐2007. We begin by examining whether the recent decline in the number of dividend payers is solely a US phenomenon or part of a more global trend. We find that at the beginning of our sample period, 72% of our sample firms pay dividends, but by 2007, this percentage decreases to 55%, with the decline more acute in common law countries. Our analysis further shows that the growing incidence of non‐dividend paying firms can be explained by an increase in the percentage of firms that have never paid dividends. We find that common law firms are less likely to initiate new dividend programs than those in civil law nations, although they tend to have more abundant growth opportunities. We further establish that this global decline in the propensity to pay dividends is more pronounced in firms incorporated in common law jurisdictions. Finally, we find that both the percentage increase in aggregate dividends and the dividend payout ratio is higher in civil law countries.

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References

1997Legal Determinants of External Finance 1992The investment opportunity set and corporate financing, dividend, and compensation policies 1998Agency Problems and Dividend Policies Around the World 2001Disappearing dividends: changing firm characteristics or lower propensity to pay?1997Legal Determinants of External Finance 2006Dividend policy and the earned/contributed capital mix: a test of the life-cycle theory☆1993Additional evidence on the association between the investment opportunity set and corporate financing, dividend, and compensation policies 2008Why do firms pay dividends? International evidence on the determinants of dividend policy☆

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