The Dividend and Share Repurchase Policies of Canadian Firms

46 Pages Posted: 28 Apr 2000

See all articles by Abe de Jong

Abe de Jong

Rotterdam School of Management, Erasmus University; Monash University

Ronald van Dijk

APG Asset Management

Chris Veld

Monash University

Date Written: 19 2001 1,


We empirically investigate dividend and share repurchase policies of Canadian firms. We have sent aquestionnaire to the 500 largest non-financial Canadian companies listed on the Toronto StockExchange, of which 191 usable responses were returned. These data are used to measure firmcharacteristics. We use several logit regression analyses to test the structure and determinants of thedividend and share repurchase choice. Our results are consistent with a structure in which thecompany first decides whether it wants to pay out cash to its shareholders or not. In the second stagethe firm decides on the form of the payout: dividends, share repurchases or both. Payout is determinedby free cash flow. The choice for dividends and repurchases depends on behavioral and taxpreferences. Furthermore, the payout is less likely to be dividends if the company has executive stockoption plans. Finally, we find evidence for the Brennan and Thakor (1990) model. According to thismodel the existence of asymmetric information amongst outsiders is associated with a preference fordividend payments over share repurchases.

Keywords: dividends, share repurchases, strategic financial decisions, payout decisions, nested logit models

JEL Classification: M, G3, G35

Suggested Citation

de Jong, Abe and van Dijk, Ronald and Veld, Chris, The Dividend and Share Repurchase Policies of Canadian Firms (19 2001 1,). ERIM Report Series Reference No. ERS-2001-88-F&A. Available at SSRN:

Abe De Jong

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-25
Rotterdam, 3000 DR
+31 10 408 1022 (Phone)

HOME PAGE: http://

Monash University ( email )

900 Dandenong Rd
Room H3-56
Caulfield East, Victoria 3145

HOME PAGE: http://

Ronald Van Dijk

APG Asset Management

Gustav Mahlerplein 3
Amsterdam, 1082 MS

Chris Veld (Contact Author)

Monash University ( email )

Building 11E
Clayton, Victoria 3800

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