Determinants of Dividend Payments

International Journal of Applied Accounting and Finance, Vol. 1, No. 1, 40-46, 2010

7 Pages Posted: 23 Jun 2011 Last revised: 24 Jun 2011

Kate Brown

University of Maryland Eastern Shore - School of Business and Technology

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: August 1, 2010

Abstract

This paper explores the contribution of various financial measures in explaining the variability in a firm’s dividend payments. Ordinary least squares analysis of data from 2003 to 2007 shows that approximately 71% of the variability in dividend payments is explained by the firm’s expected growth rate of revenues, earnings before interest and tax, market debt to capital ratio, and effective tax rate. The findings support theories in the literature that dividends paid by a firm decrease with higher expected growth in revenues, lower earnings before interest and tax, higher debt service requirements, and higher effective tax rates.

Keywords: Dividend Payments, EBIT, Market Debt to Capital Ratio, Expected Growth Rate in Revenues, Effective Tax Rate

JEL Classification: G30, G35, G39

Suggested Citation

Brown, Kate and Sum, Vichet, Determinants of Dividend Payments (August 1, 2010). International Journal of Applied Accounting and Finance, Vol. 1, No. 1, 40-46, 2010. Available at SSRN: https://ssrn.com/abstract=1867977

Kate Brown (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-7596 (Phone)
410-651-6032 (Fax)

HOME PAGE: http://www.umes.edu/bma/Brown.html

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

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