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Dividends and politics

  • Bank, Steven
  • Cheffins, Brian
  • Goergen, Marc

This paper contributes to a growing literature on politics and corporate governance by providing an empirical analysis of the impact of political factors on dividend payouts. The focus is on the determinants of dividend policy in U.K. public companies between 1949 and 2002. We augment Lintner's [Lintner, J., 1956. Distribution of incomes of corporations among dividends, retained earnings, and taxes. American Economic Review 46, 97-113.] partial adjustment model by including measures of politics and test the model using aggregate annual dividends and earnings data. We find neither the political placement of the party in power nor regulations explicitly designed to regulate corporate behaviour correlate in the direction political theories of corporate governance would predict.

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Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 25 (2009)
Issue (Month): 2 (June)
Pages: 208-224

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Handle: RePEc:eee:poleco:v:25:y:2009:i:2:p:208-224
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

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  1. P. Raghavendra Rau & Theo Vermaelen, 2002. "Regulation, Taxes, and Share Repurchases in the United Kingdom," The Journal of Business, University of Chicago Press, vol. 75(2), pages 245-282, April.
  2. James M. Poterba & Lawrence H. Summers, 1984. "The Economic Effects of Dividend Taxation," NBER Working Papers 1353, National Bureau of Economic Research, Inc.
  3. Jean Crockett & Irwin Friend, . "Dividend Policy in Perspective: Can Theory Explain Behavior? (Revision of 30-86)," Rodney L. White Center for Financial Research Working Papers 04-88, Wharton School Rodney L. White Center for Financial Research.
  4. Andrew Benito & Garry Young, 2003. "Hard Times or Great Expectations? Dividend Omissions and Dividend Cuts by UK Firms," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 531-555, December.
  5. Pagano, Marco & Volpin, Paolo, 2001. "The Political Economy of Corporate Governance," CEPR Discussion Papers 2682, C.E.P.R. Discussion Papers.
  6. Stephen P. Ferris & Nilanjan Sen & Ho Pei Yui, 2006. "God Save the Queen and Her Dividends: Corporate Payouts in the United Kingdom," The Journal of Business, University of Chicago Press, vol. 79(3), pages 1149-1174, May.
  7. Eugene F. Fama & Kenneth R. French, . "Disappearing Dividends: Changing Firm Characteristics or Lower Propensity to Pay?."," CRSP working papers 509, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  8. Jean Crockett & Irwin Friend, . "Dividend Policy in Perspective: Can Theory Explain Behavior? (Revision of 30-86)," Rodney L. White Center for Financial Research Working Papers 4-88, Wharton School Rodney L. White Center for Financial Research.
  9. Denis, David J. & Osobov, Igor, 2008. "Why do firms pay dividends? International evidence on the determinants of dividend policy," Journal of Financial Economics, Elsevier, vol. 89(1), pages 62-82, July.
  10. Randall Morck & Bernard Yeung, 2005. "Dividend Taxation and Corporate Governance," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 163-180, Summer.
  11. von Eije, Henk & Megginson, William L., 2008. "Dividends and share repurchases in the European Union," Journal of Financial Economics, Elsevier, vol. 89(2), pages 347-374, August.
  12. Crockett, Jean A & Friend, Irwin, 1988. "Dividend Policy in Perspective: Can Theory Explain Behavior?," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 603-13, November.
  13. Smith, C.W. & Watts, R.L., 1992. "The Investment Oppotunity set and Corporate Financing, Dividend and Compensation Policies," Papers 92-02, Rochester, Business - Financial Research and Policy Studies.
  14. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Agency Problems and Dividend Policies Around the World," Harvard Institute of Economic Research Working Papers 1839, Harvard - Institute of Economic Research.
  15. King, M A, 1972. "Corporate Taxation and Dividend Behaviour: A further Comment," Review of Economic Studies, Wiley Blackwell, vol. 39(2), pages 231-34, April.
  16. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 23-48, Spring.
  17. Feldstein, Martin S, 1970. "Corporate Taxation and Dividend Behaviour," Review of Economic Studies, Wiley Blackwell, vol. 37(1), pages 57-72, January.
  18. Short, Helen & Zhang, Hao & Keasey, Kevin, 2002. "The link between dividend policy and institutional ownership," Journal of Corporate Finance, Elsevier, vol. 8(2), pages 105-122, March.
  19. Briston, R J & Tomkins, C R, 1970. "The Impact of the Introduction of Corporation Tax upon the Dividend Policies of United Kingdom Companies," Economic Journal, Royal Economic Society, vol. 80(319), pages 617-37, September.
  20. Machin, Stephen J & Stewart, Mark B, 1990. "Unions and the Financial Performance of British Private Sector Establishments," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(4), pages 327-50, Oct.-Dec..
  21. Easterbrook, Frank H, 1984. "Two Agency-Cost Explanations of Dividends," American Economic Review, American Economic Association, vol. 74(4), pages 650-59, September.
  22. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
  23. Machin, S.J., 1991. "Unions and the capture of economic rents: An investigation using british firm level data," International Journal of Industrial Organization, Elsevier, vol. 9(2), pages 261-274, June.
  24. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411.
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