Reputation Building and the Lifecycle Model of Dividends

Pacific Basin Finance Journal, Vol. 46, pp. 177-190.

29 Pages Posted: 13 Apr 2020

See all articles by Thomas Flavin

Thomas Flavin

National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics, Finance and Accounting

Thomas O’Connor

National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics, Finance and Accounting

Date Written: March 17, 2020

Abstract

We analyse the relationship between corporate dividend policy and firm lifecycle in a low-disclosure regime, where domestic firms have an incentive to use dividends to build capital market reputation among external investors. We use a range of lifecycle indicators from the extant literature and find that, as predicted by the lifecycle model, dividend payouts increase along the lifecycle until peaking in the mature stage. Furthermore, dividends are positively related to growth opportunities. In all lifecycle stages, firms with relatively larger growth opportunities pay relatively larger dividends. We find that firms in low-disclosure regimes, engage in reputation-building behaviour, not just in the early stages of their lifecycle but also in the mature stage.

Keywords: dividend payout, lifecycle, reputation building, retained equity, growth opportunities

JEL Classification: G30, G32

Suggested Citation

Flavin, Thomas J and O'Connor, Thomas, Reputation Building and the Lifecycle Model of Dividends (March 17, 2020). Pacific Basin Finance Journal, Vol. 46, pp. 177-190. , Available at SSRN: https://ssrn.com/abstract=3555851

Thomas J Flavin

National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics, Finance and Accounting ( email )

County Kildare
Ireland
+353 1 708 3369 (Phone)
+353 1 708 3934 (Fax)

Thomas O'Connor (Contact Author)

National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics, Finance and Accounting ( email )

County Kildare
Ireland

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
16
Abstract Views
101
PlumX Metrics