Earnings, Working Capital and Dividend Payout: Evidence from the London Stock Exchange

Duo Xu (), Christopher Gan, Zhaohua Li and Pengcheng Wang
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Duo Xu: Department of Accounting Business College, Jiaxing University
Christopher Gan: Department of Financial and Business Systems, Faculty of Agribusiness and Commerce, Lincoln University
Zhaohua Li: Department of Financial and Business Systems, Faculty of Agribusiness and Commerce, Lincoln University
Pengcheng Wang: College of Economics and Management, China Agricultural University

Annals of Economics and Finance, 2021, vol. 22, issue 2, 421-449

Abstract: This paper examines the impacts of the earnings and working capital on the dividend payout, using firms listed on the London Stock Exchange from 1991 to 2015. The results reveal that unadjusted earnings have a positive and significant impact on firms' dividend payout, whereas the dividend-adjusted earnings are insignificant in explaining firms' dividend payout. Moreover, we find that there exists an "inverse U-shape" relationship between the working capital and dividend payout. Our findings provide more coherent evidence between the earnings and dividend payout and highlight the importance of considering working capital as a determinant in designing corporate dividend payout policy.

Keywords: Dividend Payout; Earnings; Working Capital; "Inverse U-shape" Relationship (search for similar items in EconPapers)
JEL-codes: G30 G35 M41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2021:v:22:i:2:xuganliwang

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