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Dividend Policies in an Unregulated Market: The London Stock Exchange, 1895--1905

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  • Fabio Braggion
  • Lyndon Moore

Abstract

Miller and Modigliani (1961) show that in perfect and complete financial markets a firm's value is unaffected by its dividend policy. Much of the more recent research has demonstrated that dividend policy becomes important in the presence of taxation, asymmetric information, incomplete contracts, institutional constraints, and transaction costs. By examining the effects of dividend policies on 475 British firms existing between 1895 and 1905, and consequently operating in an environment of very low taxation with an absence of institutional constraints, we find strong support for asymmetric information theories of dividend policy, and little support for agency models. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Suggested Citation

  • Fabio Braggion & Lyndon Moore, 2011. "Dividend Policies in an Unregulated Market: The London Stock Exchange, 1895--1905," Review of Financial Studies, Society for Financial Studies, vol. 24(9), pages 2935-2973.
  • Handle: RePEc:oup:rfinst:v:24:y:2011:i:9:p:2935-2973
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    References listed on IDEAS

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    Cited by:

    1. Braggion, Fabio & Moore, Lyndon, 2013. "The Economic Benefits of Political Connections in Late Victorian Britain," The Journal of Economic History, Cambridge University Press, vol. 73(01), pages 142-176, March.
    2. Ye, Qing & Turner, John D., 2014. "The cross-section of stock returns in an early stock market," International Review of Financial Analysis, Elsevier, vol. 34(C), pages 114-123.
    3. Acheson, Graeme G. & Campbell, Gareth & Turner, John D., 2016. "Common law and the origin of shareholder protection," QUCEH Working Paper Series 2016-04, Queen's University Belfast, Queen's University Centre for Economic History.
    4. repec:eee:jbfina:v:85:y:2017:i:c:p:113-131 is not listed on IDEAS
    5. Matthias Nnadi & Nyema Wogboroma & Bariyima Kabel, 2013. "Determinants of Dividend Policy: Evidence from Listed Firms in the African Stock Exchanges," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(6), pages 725-741, December.
    6. Eric Hilt, 2014. "History of American Corporate Governance: Law, Institutions, and Politics," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 1-21, December.
    7. Graeme G. Acheson & Gareth Campbell & John D. Turner & Nadia Vanteeva, 2015. "Corporate ownership and control in Victorian Britain," Economic History Review, Economic History Society, vol. 68(3), pages 911-936, August.
    8. Davies, Richard & Haldane, Andrew G. & Nielsen, Mette & Pezzini, Silvia, 2014. "Measuring the costs of short-termism," Journal of Financial Stability, Elsevier, vol. 12(C), pages 16-25.
    9. Braggion, F., 2008. "Managers, Firms and (Secret) Social Networks : The Economics of Freemasonry," Discussion Paper 2008-36, Tilburg University, Center for Economic Research.
    10. Burhop, Carsten & Chambers, David & Cheffins, Brian, 2014. "Regulating IPOs: Evidence from going public in London, 1900–1913," Explorations in Economic History, Elsevier, vol. 51(C), pages 60-76.
    11. Fabio Braggion & Lyndon Moore, 2013. "How insiders traded before rules," Business History, Taylor & Francis Journals, vol. 55(4), pages 565-584, June.
    12. Liu, Chinpiao & Chen, An-Sing, 2015. "Do firms use dividend changes to signal future profitability? A simultaneous equation analysis," International Review of Financial Analysis, Elsevier, vol. 37(C), pages 194-207.
    13. Braggion, Fabio & Giannetti, Mariassunta, 2013. "Public Debate and Stock Prices: Evidence from the Voting Premium," CEPR Discussion Papers 9619, C.E.P.R. Discussion Papers.
    14. Amanda Gregg & Steven Nafziger, 2016. "Capital Structure and Corporate Performance in Late Imperial Russia," Department of Economics Working Papers 2016-12, Department of Economics, Williams College.
    15. Turner, John D., 2014. "Financial history and financial economics," QUCEH Working Paper Series 14-03, Queen's University Belfast, Queen's University Centre for Economic History.
    16. repec:eee:glofin:v:34:y:2017:i:c:p:1-15 is not listed on IDEAS

    More about this item

    JEL classification:

    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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