Potential Dividends Versus Paid Dividends: Theoretical and Empirical Reasons to Use Paid Dividends - The Cases of Latin America and Argentina (In Spanish)

16 Pages Posted: 26 Oct 2008 Last revised: 10 May 2010

See all articles by Ignacio Velez-Pareja

Ignacio Velez-Pareja

Grupo Consultor CAV Capital Advisory & Valuation

Mariano German Merlo

University of Belgrano (U of B)

David Andres Londono Bedoya

Universidad Tecnologica de Bolivar

Julio Sarmiento-Sabogal

Pontificia Universidad Javeriana

Date Written: November 2, 2008

Abstract

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.

Keywords: Cash flows, cash flow to equity, free cash flow, liquid assets, potential dividends, firm value

JEL Classification: G12, G35, G18

Suggested Citation

Velez-Pareja, Ignacio and Merlo, Mariano German and Londono Bedoya, David Andres and Sarmiento-Sabogal, Julio, Potential Dividends Versus Paid Dividends: Theoretical and Empirical Reasons to Use Paid Dividends - The Cases of Latin America and Argentina (In Spanish) (November 2, 2008). Available at SSRN: https://ssrn.com/abstract=1289285 or http://dx.doi.org/10.2139/ssrn.1289285

Ignacio Velez-Pareja (Contact Author)

Grupo Consultor CAV Capital Advisory & Valuation ( email )

Ave Miramar # 18-93 Apt 6A
Cartagena
Colombia
+573112333074 (Phone)

HOME PAGE: http://cashflow88.com/decisiones/decisiones.html

Mariano German Merlo

University of Belgrano (U of B) ( email )

Zavala 1837
CABA, AR Buenos Aires C1426DQG
Argentina
5411 47885400 (Phone)

HOME PAGE: http://www.ub.edu.ar

David Andres Londono Bedoya

Universidad Tecnologica de Bolivar ( email )

Colombia

Julio Sarmiento-Sabogal

Pontificia Universidad Javeriana ( email )

Carrera 7 # 40-62 Piso 4
FCEA-Depto de Administración
Bogota, D.C. 00001
Colombia
(57-1)3208320 ext 3156 (Phone)
(57-1)3208320 ext 3169 (Fax)

HOME PAGE: http://www.javeriana.edu.co/decisiones/Julio

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