A behavioral perspective on corporate dividend policy: evidence from France

Abstract

Purpose This paper empirically examines the catering theory of Baker and Wurgler (2004) in the particular context of France. Considering the characteristics of French market – known for its high concentration of capital – it attempts to highlight the role family control plays in the managerial tendencies to satisfy non-informative dividend demands. Design/methodology/approach The paper focuses on a large data set of French firms included in the SBF-250 index over a period of 1992-2010. It uses a variety of dividend policy measures, including dividend premium, percentage of dividend-paying firms and probability of paying dividends. It adopts appropriate empirical specifications (time-series and probit models) to substantiate the research hypotheses. Findings The empirical findings show that the percentage of payers rises with the dividend premium, and that the dividend premium and the confidence index of French households are negatively correlated. This reflects the sensitivity of dividend demand to investor sentiment. Moreover, results of multivariate panel regression show a positive and statistically significant effect of the dividend premium on the firm’s tendency to pay, after controlling for firm characteristics. Finally, it finds that the dividend premium effect disappears in the case of family-controlled firms. This result is in line with the long-term orientation of family firms. Research limitations/implications The study focuses on the dividend payment behavior of French firms. Although dividends are deeply engrained in France, authors believe that it will be interesting to look at the whole payout policy and particularly the role played by share repurchases. Practical implications Addressing short-term catering and managerial opportunism, the results of this study may be of interest for shareholders, potential investors and regulators. Originality/value To the best of the authors’ knowledge, this is the first study that provides empirical evidence on Baker and Wurgler (2004) catering theory by considering the particularity of French market where, unlike the US, percentage of dividend-paying firms is high and the corporate ownership structures are different.

Analyst Dividend Forecasts and Their Usefulness to Investors

“…The overall average annual proportion of dividend payers is 75.5%. The U.S. exhibits the lowest percentage of dividend payers (42.7%), and Japan has the highest (91.6%), in line with earlier evidence (Hail et al 2014;Goldstein et al 2015;Trabelsi, Aziz and Lilti 2019). On average, 7 Unavailability of analyst dividend forecasts in the U.S. before 2001 can explain why these forecasts are absent in prior research and possibly why they are viewed as relatively unimportant.…”

The impact of board composition on the dividend policy of US firms

“…These papers usually tackle the issue of dividends from the agency perspective in which conflicting interests of managers may result in the expropriation of shareholders by management (Easterbrook, 1984). Additionally, some studies have studied the behavioral aspects of dividend policy in terms of investor sentiments (Baker and Wurgler, 2004;Trabelsi et al, 2019).…”

Inequalities in Skills at the End of Education

“…In Europe, France is even thought to be the country paying the most cash to shareholders (Trabelsi et al, 2019) -vers-un-record-en-2019avec-plus-de-50-milliards-deuros-distribues-par-le-cac-40 andVernimmen. net (2020).…”

“…Banks and insurance companies have not been included, due to their financial structure and the specific nature of their economic performance (Ginglinger et al, 2011;Lazonick, 2018;Trabelsi et al, 2019). Finally, companies with too many missing values have been removed from the final sample.…”

“…These developments are in line with what many observers have been pointing out for several years (see, for example, Vernimmen. net, 2020, or Trabelsi et al, 2019). The level of share buybacks remains relatively constant over the period, unlike dividends, which are more sensitive to the company's results, the business sector or stock market dynamics.…”