Dividends and Foreign Performance Signaling

25 Pages Posted: 16 Feb 2009

See all articles by Robert Joliet

Robert Joliet

IESEG School of Management Lille/Paris; French National Center for Scientific Research (CNRS) - Lille Economie & Management (LEM) UMR 9221

Aline Muller

HEC Management School University of Liège; Maastricht University - Limburg Institute of Financial Economics (LIFE)

Multiple version iconThere are 2 versions of this paper

Date Written: February 15, 2009

Abstract

This study uses Hines' (1996) dividend process model to test the effect of domestic versus foreign profitability shocks on firms' dividend payout policy. Investigating an international sample of 283 companies from Europe, Australia, New-Zealand, the U.S.A. and Canada, we find that increases in some foreign market earnings stimulate higher cash distributions than similar increases in domestic earnings. The disaggregation of foreign performance across country-specific markets reveals that managers are predominantly using dividends to signal foreign profit movements that have been generated in emerging markets and Asian Pacific developed markets - while they are not compelled to send signals related to positive earnings news originating from the other mature developed markets (North America and Western Europe). Our findings also confirm empirically the popular view that due to their higher variance and lower persistence, positive foreign profitability shocks coming from emerging markets are more difficult to integrate in stable dividend policies.

Keywords: Signaling, performance, dividend policy, multinational firm, disaggregation

JEL Classification: F23, M41, G14

Suggested Citation

Joliet, Robert and Muller, Aline, Dividends and Foreign Performance Signaling (February 15, 2009). Available at SSRN: https://ssrn.com/abstract=1343753 or http://dx.doi.org/10.2139/ssrn.1343753

Robert Joliet

IESEG School of Management Lille/Paris ( email )

Rue de la Digue 3
LILLE, 59000
France
+33 320 545 892 (Phone)
+33 320 574 855 (Fax)

HOME PAGE: http://www.ieseg.fr

French National Center for Scientific Research (CNRS) - Lille Economie & Management (LEM) UMR 9221 ( email )

60 Boulevard Vauban
LILLE, 59016
France

HOME PAGE: http://lem.cnrs.fr

Aline Muller (Contact Author)

HEC Management School University of Liège ( email )

B-4000 Liege
Belgium
+3242327435 (Phone)
+3242327376 (Fax)

Maastricht University - Limburg Institute of Financial Economics (LIFE) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
152
rank
125,067
Abstract Views
1,026
PlumX Metrics