Dividend Policies in an Unregulated Market: The London Stock Exchange 1895-1905

CentER Discussion Paper Series No. 2008-83

EFA 2009 Bergen Meetings Paper

49 Pages Posted: 14 Feb 2009 Last revised: 16 Sep 2010

See all articles by Lyndon Moore

Lyndon Moore

University of Montreal - Department of Economics

Fabio Braggion

Tilburg University - Tilburg University School of Economics and Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: September 14, 2010

Abstract

In perfect and complete financial markets Miller and Modigliani (1961) show that a firm's value is unaffected by its dividend policy. Taxation, asymmetric information, incomplete contracts, institutional constraints, and transaction costs make dividend policy important. We examine the effects of dividend policies on 469 British firms between 1895 and 1905. These firms operated in an environment of very low taxation and an absence of institutional constraints. We find strong support for asymmetric information theories of dividend policy, and little support for agency models.

Keywords: Dividend Policy, London Stock Exchange

JEL Classification: N23, G14, G35

Suggested Citation

Moore, Lyndon and Braggion, Fabio, Dividend Policies in an Unregulated Market: The London Stock Exchange 1895-1905 (September 14, 2010). CentER Discussion Paper Series No. 2008-83, EFA 2009 Bergen Meetings Paper, Available at SSRN: https://ssrn.com/abstract=1343046 or http://dx.doi.org/10.2139/ssrn.1343046

Lyndon Moore

University of Montreal - Department of Economics ( email )

C.P. 6128, succursale Centre-Ville
Montreal, Quebec H3C 3J7
Canada

Fabio Braggion (Contact Author)

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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