Dividend initiators, winners during 2008 financial crisis

Abstract

Purpose – The purpose of this paper is to describe and compare the mean response for selected financial variables in three dividend paying groups before and after the financial crisis of 2008. Dividend initiators are expected to be rewarded by investors over traditional dividend paying firms. Design/methodology/approach – Quarterly CRSP data from 2000 to 2012 are used to define dividend paying groups. Highly unbalanced financial data on dividend paying firms are analyzed in two truncated sample periods defined before and after the financial crisis. Fitted models describing differences in dividend paying groups are based on the linear mixed model representation of penalized splines with random effects to account for repeated measures over time. Findings – Results are presented on the important differences in selected financial variables before and after the financial crisis by dividend paying pattern group (traditional, initiators, residual/catering). Special emphasis is given to the analysis of market/book value ratio. Results demonstrate dividend initiators are rewarded over traditional dividend firms by investors. Firms with an intermittent paying pattern have no advantage. All dividend paying firms grow during the 2008 financial crisis. Traditional dividend payers have larger size than other dividend payers. The size effect explains results for several of the financial variables studied. Research limitations/implications – Future work can include an industry effect on the three dividend paying groups. Practical implications – Investors appear to prefer certainty as to when they receive a dividend over uncertainty, especially in times of economic downturn and economic recovery. Social implications – Enhanced awareness that different payment patterns exist and are rewarded differently over time on both the corporate issuer and investor sides. Originality/value – This study adds to body of knowledge of practical dividend payment patterns around a financial crisis. It also provides added support for dividend initiators.

Determinants of dividend payout decisions – the case of publicly quoted food industry enterprises operating in emerging markets

“…The second variable confirming this observation is the level of free cash flows, which also turned out to be a statistically significant explanatory variable characterising the period one year before the payment of the dividend took place. Similar results were obtained by Consler and Lepak (2016) who investigated the phenomenon of dividend payments during the financial crisis (though without taking into account the changes over time). The variable explaining the impact on dividend payments in the surveyed companies was GRO: This factor had been previously analyzed in research on the dynamics of dividends conducted by Jinho on a sample of Korean companies (Jeong, 2011) and Yarram and Dollery (2015), who also took into account its variability over time.…”

“…The size of the company matters, as in all countries dividends were paid by the biggest and most profitable firms (Denis & Osobov, 2008). However, this factor is related to profitability, as bigger and more profitable firms are more likely to pay dividends (Consler & Lepak, 2016;DeAngelo et al, 2006). According to Authors, the size of a firm has a significant impact on the relation of retained earnings to total equity.…”

Dividend Payout Policy and Global Financial Crisis: A Study on Asian Non-Financial Listed Companies

“…Nguyen and Tran (2016) came to the same conclusion, that companies in Thailand, Singapore, and the US increased their dividends in the post-crisis period to gain a good reputation, thus supporting the signaling theory. Moreover, Consler and Lepak (2016) also found that investors rewarded the dividend initiator for starting dividends, and all dividend companies grew during the 2008 financial crisis.…”

“…Despite its disastrous effects on the business world, a financial crisis offers a good opportunity to justify the importance of dividend policy. Nguyen and Tran (2016); Consler and Lepak (2016); Abdulkadir, Abdullah, and Wong (2015); Kuo, Philip, and Zhang (2013); He et al (2012); Smits (2012); Mollah (2011);and Reddemann et al (2010), among others, explored the impact of financial distress on firms' ability and willingness to pay dividends. He et al (2012), for instance, discovered that companies' ability to pay during the market crash declined.…”

Dividend Payout Policy and Global Financial Crisis: A Study on Malaysian Non-Financial Listed Companies

“…Thus, various reasons have been given to explain the dividend payout options during the financial crisis. Particularly, the signalling theory and catering theory have recently received some attention as explanations for changes in the dividend behaviour of firms in developed markets (Fama & French, 2001;Consler & Lepak, 2016;Chesini & Staniszewska, 2017). Kouser et al (2015) discovered a significant change in the characteristics of dividend payers during their research period on changes in dividend policy following the financial crisis.…”