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Patterns in payout policy and payout channel choice of UK firms in the 1990s

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Author Info
Renneboog, L.D.R.
Trojanowski, Grzegorz (Tilburg University, Center for Economic Research)

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Abstract

The paper examines the payout policy of UK firms listed on the London Stock Exchange during the 1990s. We complement the existing payout literature studies by analyzing jointly the trends in dividends and share repurchases. Unlike in the US, we find that, in the UK, firms do not demonstrate a decreasing propensity to distribute funds to shareholders. The role of share repurchases is increasing, but dividends still constitute a vast proportion of the total payout. Firms repurchasing shares usually pay dividends as well. We also document that there is a strong relationship between the presence of blockholders and the choice of the payout channel: firms with concentrated ownership tend to opt for dividends rather than share repurchases, irrespectively of the identity of the controlling shareholder. We argue that the differential taxation of dividends and capital gains as well as the insider trading regulation affect the relative attractiveness of dividends and share repurchases to large shareholders.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 22.

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Date of creation: 2005
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Handle: RePEc:dgr:kubcen:200522

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Find related papers by JEL classification:
G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
G30 - Financial Economics - - Corporate Finance and Governance - - - General

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