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

Christian Andres, André Betzer, Marc Goergen and Luc Renneboog

Journal of Empirical Finance, 2009, vol. 16, issue 2, 175-187

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.

Keywords: Dividend; policy; Payout; policy; Target; payout; ratio; Lintner; dividend; model; Dividend; smoothing; Partial; adjustment; model; Corporate; governance (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (50)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927-5398(08)00071-6
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:16:y:2009:i:2:p:175-187

Access Statistics for this article

Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).