Dividend Policy in the European Union

Corporate tax policy and incorporation in the EU

“…Goolsbee (2004) argues that this means that a zero tax on equity income at the personal level is probably the most accurate since small businesses usually pay very few dividends. This is supported by recent evidence on dividend payout ratios of De Angelo et al (2004) and Von Eije and Megginson (2006). We therefore take the corporate tax as a benchmark indicator for the tax on the corporate sector in estimating (2.1).…”

Payout Policy Pedagogy: What Matters and Why

“…Most of the main stylised facts about the payout policies of US firms also characterise the payout policies of European companies (see, e.g., Bancel et al, 2005;Degeorge and Maug, 2006, section 5). Most notably, in many European markets, researchers observe the same close connection between the decision to pay dividends and a firm's current profitability, size, growth prospects, and mix of earned and contributed capital as in US firms (see, e.g., Denis and Osobov, 2006;von Eije and Megginson, 2006). This same research also shows that, like US firms, European firms exhibit a high concentration of dividend payments among a relatively small number of firms with high earnings.…”

Payout Policy Pedagogy: What Matters and Why

“…Most of the main stylised facts about the payout policies of US firms also characterise the payout policies of European companies (see, e.g., Bancel et al , 2005; Degeorge and Maug, 2006, ). Most notably, in many European markets, researchers observe the same close connection between the decision to pay dividends and a firm's current profitability, size, growth prospects, and mix of earned and contributed capital as in US firms (see, e.g., Denis and Osobov, 2006; von Eije and Megginson, 2006). This same research also shows that, like US firms, European firms exhibit a high concentration of dividend payments among a relatively small number of firms with high earnings.…”

“…There are some significant differences in the payout practices of US and European firms, and these cross‐country differences offer especially interesting opportunities to enhance our understanding of how institutional factors, legal/regulatory/governance norms, tax differences, and cultural/historical factors shape firms' payout policies. For example, dividend payout ratios tend to be higher in the UK than in the USA, while US firms currently repurchase far more stock than do UK firms (see, e.g., von Eije and Megginson, 2006: Ferris et al , 2006). Renneboog and Trojanowski (2005) argue that this differential emphasis on dividends and repurchases reflects cross‐country differences in taxation and insider trading regulations, but they also document an increase in stock repurchases by UK firms over time.…”