Potential Dividends Versus Paid Dividends: Theoretical and Empirical Reasons to Use Paid Dividends - The Cases of Latin America and Argentina (In Spanish)
Mariano German Merlo
Escuela de Negocios de la Universidad de Belgrano
David Andres Londono Bedoya
Universidad Tecnologica de Bolivar
Macquarie University, Department of Applied Finance and Actuarial Science; Pontificia Universidad Javeriana
November 2, 2008
Many financial consultants, authors and teachers include changes in liquid assets (potential dividends) in the cash flows. This practice is against basic financial theory. We present economic, theoretical and empirical arguments to support the position to use only paid dividends in the cash flows. Hence when valuing cash flows we should consider paid dividends and not include potential dividends.
We present a methodological proposal to find empirical evidence to support this position. We examine the empirical evidence from five Latin American countries and analyze the regional data and the Argentine case.
This is a summary of the research results that includes a specific country. In this case, Argentina. Forthcoming, other analysis for specific countries.
Note: Downloadable document is in Spanish.
Number of Pages in PDF File: 16
Keywords: Cash flows, cash flow to equity, free cash flow, liquid assets, potential dividends, firm value
JEL Classification: G12, G35, G18working papers series
Date posted: October 26, 2008 ; Last revised: May 10, 2010
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