A Survey of Management Views on Corporate Dividend Policy in Portugal

Abstract

This paper focuses on the dividend policy of the companies listed on the Lisbon Stock Exchange (LSE), from the viewpoint of their managers. It takes as its starting point the results obtained from a questionnaire answered by the Chief Executive Office and the Chief Financial Office.

Following Lintner's conclusions (l956), which were later confirmed by the empirical studies of Fama and Babiak (l968), Baker, Farrelly and Edelman (1985) and Partington (1989), we came to the conclusion that the most significant factors were the dividend stability and the shareholders' satisfaction. The importance of signalling and clientele effects was also significant. By using the factorial analysis and the principal component analysis in our study, we tried to identify new variables, which presented positive correlation with the dividend policy. Two factors, which explain about 56% of the total variance, were found. The results suggest that the managers of the listed companies determine the respective dividend policy as passive residual, though they show concern about the signalling of the prospective profit, the quotation stability and taxes. Besides that, they seem to be worried about the dividend stability and alterations, which can be reversible, and, also, with the current practice in the sector to which the company belongs. Also, the relative importance of the amount of shares in the hands of managers and controlling groups is relevant, which can be associated with the degree of capital concentration. Finally, we can say that the fact that it is easy to obtain external capital in the future also conditions the dividend policy.

Keywords: Payout Policy, Dividends, Factor Analysis, Portugal

JEL Classification: G35