Catering and Dividend Policy: Evidence From the Netherlands Over the Twentieth Century

Forthcoming, Financial History Review

44 Pages Posted: 22 Aug 2019

See all articles by Abe de Jong

Abe de Jong

Rotterdam School of Management, Erasmus University; Monash University

Philip Fliers

Queen's University Belfast

Henry van Beusichem

University of Twente, Faculty of Behavioural, Management and Social Sciences, Department of Finance & Accounting; Rotterdam School of Management, Erasmus University - Dept. of Finance

Date Written: August 20, 2019

Abstract

This paper investigates the determinants of Dutch firms’ dividend policies in the 20th century. We identify three distinct episodes and document shifts in dividend policies in the 1930s and 1980s, because firm managers cater to the changing preferences of shareholders. The first episode, prior to the Second World War, was characterized by dividends that were fixed contracts between shareholder and management and the payouts were mechanically determined by earnings. The second epoch of Dutch dividend policy, until the 1980s, was characterized by dividend smoothing. Dividends were still strongly related to earnings, but because of shareholder’s preferences for stable dividend income, earnings changes are incorporated in dividends with a lag. Finally, dividend policy in the most recent episode is inspired by shareholder wealth maximization, based on agency and signalling motives. In this period, dividends have become largely decoupled from earnings.

Keywords: Dividends, Payout policies, Netherlands, Financial history

JEL Classification: G35, N24

Suggested Citation

de Jong, Abe and Fliers, Philip and van Beusichem, H.C., Catering and Dividend Policy: Evidence From the Netherlands Over the Twentieth Century (August 20, 2019). Forthcoming, Financial History Review. Available at SSRN: https://ssrn.com/abstract=3439820 or http://dx.doi.org/10.2139/ssrn.3439820

Abe De Jong (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

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HOME PAGE: http://https://www.rsm.nl/people/abe-de-jong/

Monash University ( email )

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Philip Fliers

Queen's University Belfast ( email )

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Belfast, BT7 1NN
Ireland

H.C. Van Beusichem

University of Twente, Faculty of Behavioural, Management and Social Sciences, Department of Finance & Accounting ( email )

P.O.Box 217
Room RA2410
7500 AE Enschede
Netherlands
+31 53 489 2391 (Phone)

HOME PAGE: http://https://people.utwente.nl/h.c.vanbeusichem

Rotterdam School of Management, Erasmus University - Dept. of Finance ( email )

P.O. Box 1738
Room T08-21
Rotterdam, 3000 DR
Netherlands
0031104082792 (Phone)

HOME PAGE: http://www.rsm.nl/home/faculty/academic_departments/finance/faculty_and_staff/phd_candidates/beusich

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