Cross-Country Determinants of Payout Policy: A Survey of European Firms

45 Pages Posted: 22 Mar 2005  

Franck Bancel

European School of Management (ESCP) - (EAP)

Usha R. Mittoo

University of Manitoba - Department of Accounting and Finance

Nalinaksha Bhattacharyya

University of Alaska Anchorage

Date Written: March 10, 2005

Abstract

We survey managers from 16 European countries to examine cross-country determinants of payout policy. We find that European managers' views on dividend policy are driven largely by factors similar to that of their U.S. peers. They strongly agree with Lintner's findings that dividends are smoothed out and are difficult to cut, although they follow different dividend targets than a fixed payout ratio. A majority of European managers, however, consider repurchases as a tool of flexibility rather than a substitute for dividends. Our cross-country analysis does not support La Porta, Lopez, Shielfer and Vishny's (2000) contention that dividend policy is influenced primarily by the quality of legal system. Instead, we find that dividend policy is determined by a complex interaction of the firm's ownership structure of the firm and the legal and institutional structure of its home country. Repurchase policy, on the other hand, is influenced primarily by tax and institutional ownership variables.

JEL Classification: G15, G38, F23

Suggested Citation

Bancel, Franck and Mittoo, Usha R. and Bhattacharyya, Nalinaksha, Cross-Country Determinants of Payout Policy: A Survey of European Firms (March 10, 2005). Available at SSRN: https://ssrn.com/abstract=683111 or http://dx.doi.org/10.2139/ssrn.683111

Franck Bancel (Contact Author)

European School of Management (ESCP) - (EAP) ( email )

79 avenue de Republique
75543 Paris, Cedex 11, 75011
France
+33 1 49 23 20 76 (Phone)
+33 1 49 23 20 80 (Fax)

Usha R. Mittoo

University of Manitoba - Department of Accounting and Finance ( email )

Faculty of Management
Winnipeg, MB R3T 5V4
Canada

Nalinaksha Bhattacharyya

University of Alaska Anchorage ( email )

3211 Providence Drive
Anchorage, AK 99508
United States
(907)786 1949 (Phone)
(907) 786 4115 (Fax)

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