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

Hard Times or Great Expectations? Dividend Omissions and Dividend Cuts by UK Firms

Contents:

Author Info

  • Andrew Benito
  • Garry Young

Abstract

This paper uncovers an increasing proportion of quoted UK companies omitting cash dividends. Using a large panel of quoted UK firms, we estimate panel data probit models for the incidence of dividend omissions and cuts as functions of financial characteristics including cash flow, leverage, investment opportunities, investment and company size. These variables account for most of the increase in omission since 1995. There is relatively little evidence to link this to the major tax reform of 1997 that abolished tax refunds on dividend income payable to tax-exempt institutions. Significant persistence effects indicate companies are slow to adjust their balance sheets through their dividend. Copyright 2003 Blackwell Publishing Ltd.

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.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=obes&volume=65&issue=5&year=2003&part=null
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

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 Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics & Statistics.

Volume (Year): 65 (2003)
Issue (Month): 5 (December)
Pages: 531-555

as in new window
Handle: RePEc:bla:obuest:v:65:y:2003:i:5:p:531-555

Contact details of provider:
Postal: Manor Rd. Building, Oxford, OX1 3UQ
Email:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0305-9049
More information through EDIRC

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0305-9049

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Eugene F. Fama & Kenneth R. French, . "Disappearing Dividends: Changing Firm Characteristics or Lower Propensity to Pay?."," CRSP working papers 509, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  2. Arulampalam, W., 1998. "A Note on Estimated Coefficients in Random Effects Probit Models," The Warwick Economics Research Paper Series (TWERPS) 520, University of Warwick, Department of Economics.
  3. Jagannathan, Murali & Stephens, Clifford P. & Weisbach, Michael S., 2000. "Financial flexibility and the choice between dividends and stock repurchases," Journal of Financial Economics, Elsevier, vol. 57(3), pages 355-384, September.
  4. Auerbach, Alan J, 1979. "Wealth Maximization and the Cost of Capital," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 433-46, August.
  5. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411.
  6. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  7. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1994. "The Financial Accelerator and the Flight to Quality," NBER Working Papers 4789, National Bureau of Economic Research, Inc.
  8. Bradford, David F., 1981. "The incidence and allocation effects of a tax on corporate distributions," Journal of Public Economics, Elsevier, vol. 15(1), pages 1-22, February.
  9. Stephen Nickell & Daphne Nicolitsas, 1995. "How does financial pressure affect firms?," LSE Research Online Documents on Economics 20698, London School of Economics and Political Science, LSE Library.
  10. Bond, Stephen R & Chennells, Lucy & Devereux, Michael P, 1996. "Taxes and Company Dividends: A Microeconometric Investigation Exploiting Cross-Section Variation in Taxes," Economic Journal, Royal Economic Society, vol. 106(435), pages 320-33, March.
  11. Alan J. Auerbach, 2001. "Taxation and Corporate Financial Policy," NBER Working Papers 8203, National Bureau of Economic Research, Inc.
  12. Blundell, Richard & Bond, Stephen & Devereux, Michael & Schiantarelli, Fabio, 1992. "Investment and Tobin's Q: Evidence from company panel data," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 233-257.
  13. Bell, Leonie & Jenkinson, Tim, 2001. "New Evidence of the Impact of Dividend Taxation and on the Identity of the Marginal Investor," CEPR Discussion Papers 2946, C.E.P.R. Discussion Papers.
  14. Crockett, Jean A & Friend, Irwin, 1988. "Dividend Policy in Perspective: Can Theory Explain Behavior?," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 603-13, November.
  15. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
  16. Easterbrook, Frank H, 1984. "Two Agency-Cost Explanations of Dividends," American Economic Review, American Economic Association, vol. 74(4), pages 650-59, September.
  17. Auerbach, Alan J. & Hassett, Kevin A., 2003. "On the marginal source of investment funds," Journal of Public Economics, Elsevier, vol. 87(1), pages 205-232, January.
  18. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  19. Bo E. Honoré & Ekaterini Kyriazidou, 2000. "Panel Data Discrete Choice Models with Lagged Dependent Variables," Econometrica, Econometric Society, vol. 68(4), pages 839-874, July.
  20. Miller, Merton H & Rock, Kevin, 1985. " Dividend Policy under Asymmetric Information," Journal of Finance, American Finance Association, vol. 40(4), pages 1031-51, September.
  21. Guilkey, David K. & Murphy, James L., 1993. "Estimation and testing in the random effects probit model," Journal of Econometrics, Elsevier, vol. 59(3), pages 301-317, October.
  22. Fenn, George W. & Liang, Nellie, 2001. "Corporate payout policy and managerial stock incentives," Journal of Financial Economics, Elsevier, vol. 60(1), pages 45-72, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bank, Steven & Cheffins, Brian & Goergen, Marc, 2009. "Dividends and politics," European Journal of Political Economy, Elsevier, vol. 25(2), pages 208-224, June.
  2. Andrew Benito, 2003. "The capital structure decisions of firms: is there a pecking order?," Banco de Espa�a Working Papers 0310, Banco de Espa�a.
  3. Benito, Andrew & Garry Young, 2002. "Financial Pressure and Balance Sheet Adjustment by UK Firms," Royal Economic Society Annual Conference 2002 20, Royal Economic Society.
  4. Kearns, Allan, 2003. "Corporate Indebtedness and Liquidations in Ireland," Quarterly Bulletin Articles, Central Bank of Ireland, pages 91-105, August.
  5. Andrew Benito & Ignacio Hernando, 2002. "Extricate: Financial Pressure and Firm Behaviour in Spain," Banco de Espa�a Working Papers 0227, Banco de Espa�a.
  6. Björn A. Hauksson, 2005. "Aggregate business fixed investment," Economics wp27_bjorn, Department of Economics, Central bank of Iceland.
  7. Philip Bunn & Garry Young, 2004. "Corporate capital structure in the United Kingdom: determinants and adjustment," Bank of England working papers 226, Bank of England.
  8. Ferris, Stephen P. & Sen, Nilanjan & Yui, Ho Pei, 2006. "Are fewer firms paying more dividends?: The international evidence," Journal of Multinational Financial Management, Elsevier, vol. 16(4), pages 333-362, October.
  9. Carlos Martins, 2007. "Consistency of Dividend Signalling and Future Maturity Level:Evidence from UK Data," Working Papers de Economia (Economics Working Papers) 40, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
  10. Mohammad Mirbagherijam, 2014. "Asymmetric Effect of Inflation on Dividend Policy of Iran's Stocks Market," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(2), pages 337-350, February.
  11. Kamat, Manoj S., 2009. "The Ownership and Industry Effects of Corporate Dividend Policy in India, 1961-2007," MPRA Paper 12545, University Library of Munich, Germany.
  12. Denis, David J. & Osobov, Igor, 2008. "Why do firms pay dividends? International evidence on the determinants of dividend policy," Journal of Financial Economics, Elsevier, vol. 89(1), pages 62-82, July.
  13. Leibrecht, Markus & Bellak, Christian & Wild, Michael, 2009. "Does lowering dividend tax rates increase dividends repatriated?: evidence of intra-firm cross-border dividend repatriation policies by German Multinational Enterprises," Discussion Paper Series 1: Economic Studies 2009,19, Deutsche Bundesbank, Research Centre.
  14. du Jardin, Philippe & Séverin, Eric, 2011. "Dividend policy," MPRA Paper 44382, University Library of Munich, Germany.
  15. Kellard, Neil M. & Nankervis, John C. & Papadimitriou, Fotios I., 2010. "Predicting the equity premium with dividend ratios: Reconciling the evidence," Journal of Empirical Finance, Elsevier, vol. 17(4), pages 539-551, September.
  16. Philip Bunn & Kamakshya Trivedi, 2005. "Corporate expenditures and pension contributions: evidence from UK company accounts," Bank of England working papers 276, Bank of England.
  17. Andrew Benito, 2003. "The incidence and persistence of dividend omissions by Spanish firms," Banco de Espa�a Working Papers 0303, Banco de Espa�a.
  18. Baba, Naohiko, 2009. "Increased presence of foreign investors and dividend policy of Japanese firms," Pacific-Basin Finance Journal, Elsevier, vol. 17(2), pages 163-174, April.

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:bla:obuest:v:65:y:2003:i:5:p:531-555. 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: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

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.