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Deterring Takeover: Evidence from a Large Panel of UK Firms

  • Andrew P. Dickerson

    ()

  • Heather D. Gibson
  • Euclid Tsakalotos

    ()

We investigate the relationship between a company's dividend strategy and its risk of takeover. Our results from a large panel of UK quoted companies suggest that higher dividend payments are associated with a significantly lower conditional probability (hazard) of takeover. Moreover, firms which wish to avoid takeover would be better to distribute the marginal £1 of earnings in dividends rather than investing it in the company. We consider two explanations for these findings. We suggest that the presence of an active market for corporate control could encourage firms to raise dividends to maintain shareholder loyalty.

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Paper provided by School of Economics, University of Kent in its series Studies in Economics with number 9707.

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Date of creation: Jun 1997
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Publication status: Published in Journal of Industrial Economics, 1998, XLV1, 3, pp.281-300
Handle: RePEc:ukc:ukcedp:9707
Contact details of provider: Postal: School of Economics, University of Kent, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 827497
Web page: http://www.kent.ac.uk/economics/

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