Post by Sapphire Capital on Sept 23, 2008 22:46:53 GMT 4
The Dividend Policy of German Firms
Christian Andres
University of Bonn - Institute of Business Administration I
André Betzer
University of Bonn
Marc Goergen
University of Sheffield Management School; European Corporate Governance Institute (ECGI)
Luc Renneboog
Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI)
August 04, 2008
CentER Discussion Paper Series No. 2008-67
TILEC Discussion Paper No. 2008-27
Abstract:
German firms pay out a lower proportion of their cash flows, but a higher proportion of their published profits than UK and US firms. We estimate partial adjustment models and report two major findings. First, German firms base their dividend decisions on cash flows rather than published earnings as (i) published earnings do not correctly reflect performance because German firms retain parts of their earnings to build up legal reserves, (ii) German accounting is conservative, (iii) published earnings are subject to more smoothing than cash flows. Second, to the opposite of UK and US firms, German firms have more flexible dividend policies as they are willing to cut the dividend when profitability is only temporarily down.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1262171_code847251.pdf?abstractid=1262171&mirid=3
Christian Andres
University of Bonn - Institute of Business Administration I
André Betzer
University of Bonn
Marc Goergen
University of Sheffield Management School; European Corporate Governance Institute (ECGI)
Luc Renneboog
Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI)
August 04, 2008
CentER Discussion Paper Series No. 2008-67
TILEC Discussion Paper No. 2008-27
Abstract:
German firms pay out a lower proportion of their cash flows, but a higher proportion of their published profits than UK and US firms. We estimate partial adjustment models and report two major findings. First, German firms base their dividend decisions on cash flows rather than published earnings as (i) published earnings do not correctly reflect performance because German firms retain parts of their earnings to build up legal reserves, (ii) German accounting is conservative, (iii) published earnings are subject to more smoothing than cash flows. Second, to the opposite of UK and US firms, German firms have more flexible dividend policies as they are willing to cut the dividend when profitability is only temporarily down.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1262171_code847251.pdf?abstractid=1262171&mirid=3