When do German firms change their dividends? |
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| Institution: | 1. Director of the Accounting and Financial Studies Department, Universidad Icesi Cali Colombia;2. Department of Accounting and Financial Studies, Universidad Icesi Cali Colombia;1. New York University, New York, NY, USA;2. Temple University, Philadelphia, PA, USA;3. Securities and Exchange Commission, Washington, DC, USA;1. Istanbul Stock Exchange, and Koc University, Turkey;2. Driehaus College of Business, DePaul University, United States;3. Rowe School of Business, Dalhousie University, Canada |
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| Abstract: | 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. |
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