A zero cash dividend policy: the UK experience

H. Kent Baker (), Erhan Kilincarslan () and Sercan Demiralay ()
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H. Kent Baker: American University
Erhan Kilincarslan: University of Huddersfield
Sercan Demiralay: Nottingham Trent University

Review of Quantitative Finance and Accounting, 2025, vol. 65, issue 2, No 12, 837-883

Abstract: Abstract We investigate the perceptions of corporate managers of non-dividend-paying firms listed on the London Stock Exchange (LSE) to identify the factors and explanations leading to a zero cash dividend policy. Our survey evidence shows that the main reasons for not paying dividends involve poor profitability, the firm’s life cycle stage and profitable growth opportunities. Managers consider shareholder preferences when setting a zero cash dividend policy, but neither taxes nor share repurchases (as substitutes for cash dividends) explain this policy. High insider ownership and transaction costs also do not explain why some UK companies pay no cash dividends. However, respondents confirm that the cost of raising new external funds (debt) is an important factor in not distributing cash dividends. Our results are inconclusive on the potential signaling effect of not paying dividends. Finally, the findings indicate that the COVID-19 pandemic did not affect the decision to follow a zero cash dividend policy in the United Kingdom.

Keywords: Cash dividends; Zero cash dividend policy; Survey approach; London stock exchange; The United Kingdom (search for similar items in EconPapers)
JEL-codes: G35 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11156-024-01362-5

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