Research Seminar of Graduate School of Management SPbU “Dividend Decisions of UK Firms: What Do We Really Know?” will be held on May 24, 2016. Anna Grosman, Ph.D., Assistant Professor at Aston Business School (Birmingham, United Kingdom) will be a speaker.
The paper was prepared jointly with Ciaran Driver, Pasquale Scaramozzino, SOAS, University of London.
Alexander V. Bukhvalov, Doctor of Sc., Professor, Head of Department of Finance and Accounting SPbU will moderate the seminar.
This paper reports estimates of UK dividend declarations and dividend payments. We begin by replicating work in previous literature, noting that many of the effects can only be identified if a tight set of maintained hypotheses narrows the theoretical field. This is unsatisfactory because over time, maintained hypotheses such as the form in which agency problems are manifested may change e.g. from a classical managerial agency problem to one in which sets of investors and incentivized managers may be aligned. Furthermore the standard set of assumptions may not be relevant across jurisdictions so that in the UK, for example, the market for corporate control may be more important than debt-based monitoring for most firms. This study engages with the identification problem, proposing a set of hypotheses that can be tested using a set of variables from the IBES databank. An additional contribution of the paper is to consider in tandem the decision to pay dividends and the amount paid; this can best be achieved by Heckman estimation. The results show that perceived investor pressure on firms to disgorge earnings, particularly under conditions of heightened takeover risk is an important determinant of dividend payout. Traditional agency views are not supported and there is only weak evidence for signaling.