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

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