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International Dividend Repatriations

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  • Alexander Lehmann
  • Ashoka Mody

Abstract

Income earned by the branches and subsidiaries of multinational firms can be either reinvested in the host country or repatriated as dividends to the firms' headquarters. Despite the rapid growth of foreign direct investment in the 1990s, there has been relatively limited analysis of the dividend behavior of multinationals. We find that investors in multinationals from the two largest foreign- investing countries-the United Kingdom and the United States-require a steady flow of dividends, consistent with a view that such regular dividend payments are a mechanism through which to discipline host-country managers. In contrast, German investors, who tend to invest in riskier countries, do not appear to demand persistent dividend payments. Changes in income also influence dividends. This payout ratio from income appears, for example, to be lower for less risky countries. Finally, the evidence suggests that dividend payments do not necessarily aggravate the balance of payments position during crises.

Suggested Citation

  • Alexander Lehmann & Ashoka Mody, 2004. "International Dividend Repatriations," IMF Working Papers 04/5, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:04/5
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    References listed on IDEAS

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    1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    2. James R. Hines, Jr. & R. Glenn Hubbard, 1990. "Coming Home To America: Dividend Repatriations By U.S. Multinationals," NBER Chapters,in: Taxation in the Global Economy, pages 161-208 National Bureau of Economic Research, Inc.
    3. Altshuler, Rosanne & Grubert, Harry, 2003. "Repatriation taxes, repatriation strategies and multinational financial policy," Journal of Public Economics, Elsevier, vol. 87(1), pages 73-107, January.
    4. Desai, Mihir A. & Foley, C. Fritz & Hines, James R. Jr., 2001. "Repatriation Taxes and Dividend Distortions," National Tax Journal, National Tax Association, vol. 54(4), pages 829-851, December.
    5. Benartzi, Shlomo & Michaely, Roni & Thaler, Richard H, 1997. " Do Changes in Dividends Signal the Future or the Past?," Journal of Finance, American Finance Association, vol. 52(3), pages 1007-1034, July.
    6. Alan Greenspan, 2002. "Corporate governance," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(3), pages 3-6, October.
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    Cited by:

    1. repec:eur:ejesjr:85 is not listed on IDEAS
    2. Selin Sayek & Alexander Lehmann & Hyoung Goo Kang, 2004. "Multinational Affiliates and Local Financial Markets," IMF Working Papers 04/107, International Monetary Fund.
    3. Elina Ribakova & Balázs Horváth & Dimitri G Demekas & Yi Wu, 2005. "Foreign Direct Investment in Southeastern Europe; How (and How Much) Can Policies Help?," IMF Working Papers 05/110, International Monetary Fund.

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