Takeover Risk and Dividend Strategy: A Study of UK Firms
The authors investigate the relationship between a company's dividend strategy and its risk of takeover. Their results from a large panel of U.K. quoted companies suggest that higher dividend payments are associated with a significantly lower conditional probability (hazard) of takeover. Moreover, firms that wish to avoid takeover would be better to distribute the marginal L1 of earnings in dividends rather than investing it in the company. The authors consider two explanations for these findings. They suggest that the presence of an active market for corporate control could encourage firms to raise dividends to maintain shareholder loyalty. Copyright 1998 by Blackwell Publishing Ltd
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Volume (Year): 46 (1998)
Issue (Month): 3 (September)
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