Are fewer firms paying more dividends?: The international evidence

This study examines aggregate patterns of dividends and earnings for the two largest equity markets outside of the U.S. over 1990–2001. Although aggregate U.K. and Japanese dividends exhibit modest increases, neither the magnitude nor the trend is comparable to the U.S. experience. Further, we note important differences in the level of aggregate dividends between keiretsu, independent and hybrid firms. This suggests the importance of corporate organizational form in understanding Japanese dividend behavior over time. We find evidence of dividend concentration in the U.K., but not in Japan. Fewer firms are paying more dividends, but not everywhere. We find evidence of earnings concentration in the U.K., but such consolidation in Japan is limited to independent firms. Our analysis offers mixed results for the relation between a firm's earnings and its ability to pay dividends. Few U.K. firms with negative earnings pay dividends while 73% of comparable Japanese firms do. The U.K. economy rather than the Japanese, increasingly resembles a two-tier system with a small set of very high earners providing a disproportional percentage of aggregate dividends. Finally, our evidence suggests that the general stability of Japanese and U.K. payout practices is inconsistent with a reduced propensity to pay dividends.