Voluntary zero-dividend paying firms: characteristics and performance

Hyunseok Kim and Ju Hyun Kim

Applied Economics, 2019, vol. 51, issue 50, 5420-5446

Abstract: We investigate the characteristics of ‘voluntary zero dividend paying’ firms and their subsequent performance. We define NDR_HP (no dividends or repurchases, with high profitability) firms as those with profits above the industry median and yet pay out zero dividends (including share repurchases). Signalling, agency, residual dividend, and life cycle theories explain firm characteristics and dividend payouts, to which we add the novel variables CEO overconfidence and market competition. We discover that growth opportunity, capital expenditure, and CEO overconfidence are positively related to NDR_HP. In addition, we find that the NDR_HP group outperforms all other groups in terms of future performance.

Date: 2019
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DOI: 10.1080/00036846.2019.1610713

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