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When do German firms change their dividends?

Goergen, Marc, Renneboog, Luc and Correia da Silva, L. 2005. When do German firms change their dividends? Journal of Corporate Finance 11 (1-2) , pp. 375-399. 10.1016/j.jcorpfin.2003.09.001

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Dividends of German firms are often perceived to be more flexible than those of Anglo-American firms. We analyse the decision to change the dividend for 221 German firms over 1984–1993. Consistent with Lintner [Am. Econ. Rev. 46 (1956) 97], net earnings are key determinants of dividend changes. However, our findings also refine those of Lintner [Am. Econ. Rev. 46 (1956) 97] and Miller and Modigliani [J. Bus. 34 (1961) 411]. First, the occurrence of a loss is a key determinant of dividends in addition to the traditional key determinant, the level of net earnings. Second, the majority of dividend cuts or omissions are temporary. This stands in marked contrast with DeAngelo et al. [J. Finance 47 (1992) 1837] who report that US firms are more likely to reduce their dividend when earnings deteriorate on a permanent basis. Finally, we find that firms with a bank as their major shareholder are more willing to omit their dividend than firms controlled by other shareholders.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Uncontrolled Keywords: Dividend policy; Ownership; Control; Bank monitoring; Corporate governance
Publisher: Elsevier
ISSN: 0929-1199
Last Modified: 04 Jun 2017 04:22

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