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The changing role of dividends: a firm-level study from the nineteenth to the twenty-first century

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Author Info
Stephen R. Foerster
Stephen G. Sapp
Abstract

We investigate the changes in dividend policy for one of North America's oldest banks (and Canada's first bank), Bank of Montreal, over time by considering the relationships between dividends, prices and earnings for this prominent firm. In the early part of the sample we find that annual dividend and earnings changes are highly variable, with dividend changes following changes in earnings and a larger portion of investors' returns coming from dividends. Since World War II dividend policy has been characterized by more stable and gradual increases in dividends, with more of investors' returns coming from capital gains. Overall, our results suggest that investors' perception of dividends has changed over time, allowing management to pay smaller dividends and reinvest funds in the firm.

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File URL: http://economics.ca/cgi/xms?jab=v39n4/CJEv39n4p1316.pdf
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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 39 (2006)
Issue (Month): 4 (November)
Pages: 1316-1344
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Handle: RePEc:cje:issued:v:39:y:2006:i:4:p:1316-1344

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Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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This page was last updated on 2009-12-21.

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