Dividend policy of German firms: a panel data analysis of partial adjustment models

Andres, Christian, Betzer, André, Goergen, Marc ORCID: https://orcid.org/0000-0003-4391-2651 and Renneboog, Luc 2009. Dividend policy of German firms: a panel data analysis of partial adjustment models. Journal of Empirical Finance 16 (2) , pp. 175-187. 10.1016/j.jempfin.2008.08.002

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Abstract

German firms pay out a lower proportion of their cash flows, but a higher proportion of their published profits than UK and US firms. We estimate partial adjustment models and report two major findings. First, German firms base their dividend decisions on cash flows rather than published earnings as (i) published earnings do not correctly reflect performance because German firms retain parts of their earnings to build up legal reserves, (ii) German accounting is conservative, (iii) published earnings are subject to more smoothing than cash flows. Second, to the opposite of UK and US firms, German firms have more flexible dividend policies as they are willing to cut the dividend when profitability is only temporarily down.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HF Commerce H Social Sciences > HG Finance
Uncontrolled Keywords:	Dividend policy ; Payout policy ; Target payout ratio ; Lintner dividend model ; Dividend smoothing ; Partial adjustment model ; Corporate governance
Publisher:	Elsevier
ISSN:	0927-5398
Last Modified:	19 Oct 2022 09:56
URI:	https://orca.cardiff.ac.uk/id/eprint/22720

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