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International Dividend Repatriations

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Author Info

  • Alexander Lehmann
  • Ashoka Mody

Abstract

Income earned by the branches and subsidiaries of multinational firms can be either reinvested in the host country or repatriated as dividends to the firms' headquarters. Despite the rapid growth of foreign direct investment in the 1990s, there has been relatively limited analysis of the dividend behavior of multinationals. We find that investors in multinationals from the two largest foreign- investing countries-the United Kingdom and the United States-require a steady flow of dividends, consistent with a view that such regular dividend payments are a mechanism through which to discipline host-country managers. In contrast, German investors, who tend to invest in riskier countries, do not appear to demand persistent dividend payments. Changes in income also influence dividends. This payout ratio from income appears, for example, to be lower for less risky countries. Finally, the evidence suggests that dividend payments do not necessarily aggravate the balance of payments position during crises.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/5.

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Length: 26
Date of creation: 01 Jan 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/5

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Keywords: Transnational corporations;

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References

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  1. Shlomo Benartzi & Roni Michaely & Richard Thaler, . "Do Changes in Dividends Signal the Future or the Past?," CRSP working papers 327, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  2. La Porta, Rafael & Lopez-de-Silanes, Florencio & Schleifer, Andrei & Vishny, Robert, 2001. "Investor Protection and Corporate Governance," Working Paper Series rwp01-017, Harvard University, John F. Kennedy School of Government.
  3. Alan Greenspan, 2002. "Corporate governance," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 3(3), pages 3-6, October.
  4. Desai, Mihir A. & Foley, C. Fritz & Hines, James R. Jr., 2001. "Repatriation Taxes and Dividend Distortions," National Tax Journal, National Tax Association, vol. 54(n. 4), pages 829-51, December .
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Cited by:
  1. Elina Ribakova & Balázs Horváth & Dimitri G. Demekas & Yi Wu, 2005. "Foreign Direct Investment in Southeastern Europe: How (and How Much) Can Policies Help?," IMF Working Papers 05/110, International Monetary Fund.
  2. Selin Sayek & Alexander Lehmann & Hyoung Goo Kang, 2004. "Multinational Affiliates and Local Financial Markets," IMF Working Papers 04/107, International Monetary Fund.

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