Hard Times or Great Expectations?: Dividend omissions and dividend cuts by UK firms

Andrew Benito and Garry Young

Bank of England working papers from Bank of England

Abstract: The payment of dividends is one of the key unresolved puzzles of company financial behaviour. This paper uncovers a more recent dividend puzzle; that of an increasing proportion of quoted UK companies omitting cash dividends. Also motivated by a desire to understand corporate balance sheet adjustment, models for the incidence of dividend omissions and cuts are estimated as functions of financial characteristics including cash flow, leverage, investment opportunities, investment and company size. These financial variables can account for most of the increase in omissions since 1995. There is relatively little evidence to link this to the major tax reform of 1997 that abolished tax refunds on dividend income payable to tax-exempt institutions. Significant persistence effects indicate that companies are slow to adjust their balance sheets through dividends.

Date: 2001-12
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Hard Times or Great Expectations? Dividend Omissions and Dividend Cuts by UK Firms (2003)
Working Paper: Hard Times or Greatr Expectations?: Dividend Omissions and Dividend Cuts by UK Firms (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:147

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