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Dividends versus Share Repurchases Evidence from Canada: 1985–2003

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  • Maher Kooli
  • Jean‐François L'Her

Abstract

This paper provides out‐of‐sample evidence on the payout policy in Canada during the 1985–2003 period. First, we show that the proportion of nonfinancial firms paying dividends has decreased, while the proportion initiating repurchase programs has increased. We also show that Canadian firms paying dividends and repurchasing shares are extremely concentrated. Second, we focus on the factors that could affect the choice between repurchases and dividends. We find that dividends and repurchases are used by different types of firms. While we do not confirm the financial flexibility hypothesis, our results are consistent with the substitution hypothesis after controlling for selection bias and endogeneity.

Suggested Citation

  • Maher Kooli & Jean‐François L'Her, 2010. "Dividends versus Share Repurchases Evidence from Canada: 1985–2003," The Financial Review, Eastern Finance Association, vol. 45(1), pages 57-81, February.
    • Handle: RePEc:bla:finrev:v:45:y:2010:i:1:p:57-81
    DOI: 10.1111/j.1540-6288.2009.00237.x
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    Cited by:

    1. Geiler, P.H.M. & Renneboog, L.D.R., 2014. "Executive Remuneration and the Payout Decision," Discussion Paper 2014-032, Tilburg University, Center for Economic Research.
    2. Andriosopoulos, Dimitris & Hoque, Hafiz, 2013. "The determinants of share repurchases in Europe," International Review of Financial Analysis, Elsevier, vol. 27(C), pages 65-76.
    3. Burak Pirgaip & Semra Karacaer, 2017. "Why Do Firms Repurchase Their Stocks? Evidence From An Emerging Market," Eurasian Journal of Business and Management, Eurasian Publications, vol. 5(3), pages 26-34.
    4. Tao Zeng, 2011. "Intercorporate Ownership, Taxes, and Corporate Payout Choices," Accounting Perspectives, John Wiley & Sons, vol. 10(4), pages 265-283, December.

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