Paying dividends: Cash or credit?

Chris M. Lawrey (), Kathleen P. Fuller () and Brandon C. L. Morris ()
Additional contact information
Chris M. Lawrey: University of South Alabama
Kathleen P. Fuller: University of Mississippi
Brandon C. L. Morris: Wright State University

Journal of Asset Management, 2020, vol. 21, issue 6, No 3, 513-523

Abstract: Abstract This paper examines to what extent firms utilize lines of credit to fund cash dividends. We find that higher dividend payouts are related to higher liquidity and that dividend-paying firms who experience cash shortages will utilize credit lines to continue dividend payments. Additionally, we show that credit lines are a permanent component of dividend-paying firms’ capital structure. Our sample statistics indicate that dividend-paying firms are considerably different than non-dividend-paying firms. Dividend payers tend to be more liquid despite having less cash, have smaller credit line balances, have higher market capitalizations, have less long-term debt, are more profitable, and spend less on capital investments. We conclude that access to credit lines is an important component of dividend-paying firms’ capital structure while the level of cash is not.

Keywords: Working capital; Credit lines; Dividend policy; Liquidity (search for similar items in EconPapers)
JEL-codes: G30 G35 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1057/s41260-020-00180-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:pal:assmgt:v:21:y:2020:i:6:d:10.1057_s41260-020-00180-3

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41260

DOI: 10.1057/s41260-020-00180-3

Access Statistics for this article

Journal of Asset Management is currently edited by Marielle de Jong and Dan diBartolomeo

More articles in Journal of Asset Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().