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Hard Times or Great Expectations?: Dividend omissions and dividend cuts by UK firms


  • Andrew Benito
  • Garry Young


The payment of dividends is one of the key unresolved puzzles of company financial behaviour. This paper uncovers a more recent dividend puzzle; that of an increasing proportion of quoted UK companies omitting cash dividends. Also motivated by a desire to understand corporate balance sheet adjustment, models for the incidence of dividend omissions and cuts are estimated as functions of financial characteristics including cash flow, leverage, investment opportunities, investment and company size. These financial variables can account for most of the increase in omissions since 1995. There is relatively little evidence to link this to the major tax reform of 1997 that abolished tax refunds on dividend income payable to tax-exempt institutions. Significant persistence effects indicate that companies are slow to adjust their balance sheets through dividends.

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  • Andrew Benito & Garry Young, 2001. "Hard Times or Great Expectations?: Dividend omissions and dividend cuts by UK firms," Bank of England working papers 147, Bank of England.
  • Handle: RePEc:boe:boeewp:147

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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Benito, Andrew & Garry Young, 2002. "Financial Pressure and Balance Sheet Adjustment by UK Firms," Royal Economic Society Annual Conference 2002 20, Royal Economic Society.
    3. Ferris, Stephen P. & Sen, Nilanjan & Yui, Ho Pei, 2006. "Are fewer firms paying more dividends?: The international evidence," Journal of Multinational Financial Management, Elsevier, vol. 16(4), pages 333-362, October.
    4. Andrew Benito, 2003. "The incidence and persistence of dividend omissions by Spanish firms," Working Papers 0303, Banco de España;Working Papers Homepage.
    5. Baba, Naohiko, 2009. "Increased presence of foreign investors and dividend policy of Japanese firms," Pacific-Basin Finance Journal, Elsevier, vol. 17(2), pages 163-174, April.
    6. Kearns, Allan, 2003. "Corporate Indebtedness and Liquidations in Ireland," Quarterly Bulletin Articles, Central Bank of Ireland, pages 91-105, August.
    7. Mohammad Mirbagherijam, 2014. "Asymmetric Effect of Inflation on Dividend Policy of Iran's Stocks Market," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(2), pages 337-350, February.
    8. repec:eco:journ1:2017-03-54 is not listed on IDEAS
    9. Leibrecht, Markus & Bellak, Christian & Wild, Michael, 2009. "Does lowering dividend tax rates increase dividends repatriated?: evidence of intra-firm cross-border dividend repatriation policies by German Multinational Enterprises," Discussion Paper Series 1: Economic Studies 2009,19, Deutsche Bundesbank.
    10. Philip Bunn & Garry Young, 2004. "Corporate capital structure in the United Kingdom: determinants and adjustment," Bank of England working papers 226, Bank of England.
    11. Björn A. Hauksson, 2005. "Aggregate business fixed investment," Economics wp27_bjorn, Department of Economics, Central bank of Iceland.
    12. Wiji Arulampalam & Mark B. Stewart, 2009. "Simplified Implementation of the Heckman Estimator of the Dynamic Probit Model and a Comparison with Alternative Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(5), pages 659-681, October.
    13. du Jardin, Philippe & Séverin, Eric, 2011. "Dividend policy," MPRA Paper 44382, University Library of Munich, Germany.
    14. Florackis, Chris & Kanas, Angelos & Kostakis, Alexandros, 2015. "Dividend policy, managerial ownership and debt financing: A non-parametric perspective," European Journal of Operational Research, Elsevier, vol. 241(3), pages 783-795.
    15. Chen, Jie & Leung, Woon Sau & Goergen, Marc, 2017. "The impact of board gender composition on dividend payouts," Journal of Corporate Finance, Elsevier, vol. 43(C), pages 86-105.
    16. Kamat, Manoj S., 2009. "The Ownership and Industry Effects of Corporate Dividend Policy in India, 1961-2007," MPRA Paper 12545, University Library of Munich, Germany.
    17. Andrew Benito, 2003. "The capital structure decisions of firms: is there a pecking order?," Working Papers 0310, Banco de España;Working Papers Homepage.
    18. Bank, Steven & Cheffins, Brian & Goergen, Marc, 2009. "Dividends and politics," European Journal of Political Economy, Elsevier, vol. 25(2), pages 208-224, June.
    19. Abdou, Hussein A. & Pointon, John & El-Masry, Ahmed & Olugbode, Moji & Lister, Roger J., 2012. "A variable impact neural network analysis of dividend policies and share prices of transportation and related companies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 796-813.
    20. Philip Bunn & Kamakshya Trivedi, 2005. "Corporate expenditures and pension contributions: evidence from UK company accounts," Bank of England working papers 276, Bank of England.
    21. Kellard, Neil M. & Nankervis, John C. & Papadimitriou, Fotios I., 2010. "Predicting the equity premium with dividend ratios: Reconciling the evidence," Journal of Empirical Finance, Elsevier, vol. 17(4), pages 539-551, September.
    22. Benoît D'Udekem, 2014. "Rational Dividend Addiction in Banking," Working Papers CEB 14-013, ULB -- Universite Libre de Bruxelles.
    23. Carlos Martins, 2007. "Consistency of Dividend Signalling and Future Maturity Level:Evidence from UK Data," Working Papers de Economia (Economics Working Papers) 40, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
    24. Rihanat Idowu Abdulkadir & Nur Adiana Hiau Abdullah & Wong Woei-Chyuan, 2015. "Dividend Policy Changes in The Pre-, Mid-, and Post-Financial Crisis: Evidence from The Nigerian Stock Market," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 11(2), pages 103-126.
    25. Andrew Benito & Ignacio Hernando, 2002. "Extricate: Financial Pressure and Firm Behaviour in Spain," Working Papers 0227, Banco de España;Working Papers Homepage.

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