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International Dividend Repatriations

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  • Mr. Alexander Lehmann
  • Mr. 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

  • Mr. Alexander Lehmann & Mr. Ashoka Mody, 2004. "International Dividend Repatriations," IMF Working Papers 2004/005, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2004/005
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    References listed on IDEAS

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    Cited by:

    1. Ms. Elina Ribakova & Mr. Balázs Horváth & Mr. Dimitri G Demekas & Mr. Yi Wu, 2005. "Foreign Direct Investment in Southeastern Europe: How (and How Much) Can Policies Help?," IMF Working Papers 2005/110, International Monetary Fund.
    2. Llesh Lleshaj & Arben Malaj, 2016. "The Impact of Foreign Direct Investments (FDIs) on Economic Growth: The Solow Model in the Case of Albania," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 2, January -.
    3. Selin Sayek & Mr. Alexander Lehmann & Hyoung Goo Kang, 2004. "Multinational Affiliates and Local Financial Markets," IMF Working Papers 2004/107, International Monetary Fund.
    4. M. Jonathan C. Eklund, 2022. "Do multinational firms respond to personal dividend income tax rates?," Empirical Economics, Springer, vol. 62(4), pages 1743-1771, April.
    5. Bhat Ramesh & Pandey I M, 2004. "Dividend Behaviour of Indian Companies Under Monetary Policy Restrictions," IIMA Working Papers WP2004-05-07, Indian Institute of Management Ahmedabad, Research and Publication Department.

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