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Takeover Risk and Dividend Strategy: A Study of UK Firms

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  • Dickerson, Andrew P
  • Gibson, Heather D
  • Tsakalotos, Euclid

Abstract

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

Suggested Citation

  • Dickerson, Andrew P & Gibson, Heather D & Tsakalotos, Euclid, 1998. "Takeover Risk and Dividend Strategy: A Study of UK Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 46(3), pages 281-300, September.
  • Handle: RePEc:bla:jindec:v:46:y:1998:i:3:p:281-300
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    Citations

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    Cited by:

    1. Hassel, Anke & Beyer, Jürgen, 2001. "The effects of convergence: Internationalisation and the changing distribution of net value added in large German firms," MPIfG Discussion Paper 01/7, Max Planck Institute for the Study of Societies.
    2. Silviano Esteve-Pérez & Amparo Sanchis-Llopis & Juan Sanchis-Llopis, 2010. "A competing risks analysis of firms’ exit," Empirical Economics, Springer, vol. 38(2), pages 281-304, April.
    3. Andy Cosh & Alan Hughes, 2008. "Takeovers after "Takeovers"," Working Papers wp363, Centre for Business Research, University of Cambridge.
    4. Dimara, Efthalia & Skuras, Dimitris & Tsekouras, Kostas & Tzelepis, Dimitris, 2008. "Productive efficiency and firm exit in the food sector," Food Policy, Elsevier, vol. 33(2), pages 185-196, April.
    5. Silviano Esteve-Pérez, 2012. "Consolidation by merger: the UK beer market," Small Business Economics, Springer, vol. 39(1), pages 207-229, July.
    6. Andrew P. Dickerson & Heather D. Gibson & Euclid Tsakalotos, 2003. "Is attack the best form of defence? A competing risks analysis of acquisition activity in the UK," Cambridge Journal of Economics, Oxford University Press, vol. 27(3), pages 337-357, May.
    7. Dickerson, Andrew P. & Gibson, Heather D. & Tsakalotos, Euclid, 2002. "Takeover risk and the market for corporate control: the experience of British firms in the 1970s and 1980s," International Journal of Industrial Organization, Elsevier, vol. 20(8), pages 1167-1195, October.
    8. Jad Chaaban & Vincent Réquillart & Audrey Trévisiol, 2005. "The role of technical efficiency in takeovers: Evidence from the French cheese industry, 1985-2000," Agribusiness, John Wiley & Sons, Ltd., vol. 21(4), pages 545-564.
    9. Alan Marco & Gordon Rausser, 2011. "Complementarities and spillovers in mergers: an empirical investigation using patent data," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 20(3), pages 207-231.
    10. Dimara, Efthalia & Tzelepis, Dimitris & Skuras, Dimitris, 2000. "Regional Development Incentives And Firm Survival: A Case Study Of The Greek Food Sector," ERSA conference papers ersa00p209, European Regional Science Association.
    11. Jiang, Fuxiu & Ma, Yunbiao & Shi, Beibei, 2017. "Stock liquidity and dividend payouts," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 295-314.
    12. Trimbath, S. & Frydman, H. & Frydman, R., 2000. "Corporate Inefficiency and the Risk of Takeover," Working Papers 00-14, C.V. Starr Center for Applied Economics, New York University.

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