TY - JOUR
T1 - The dividend policy of German firms
T2 - A dynamic panel data analysis with partial adjustment models
AU - Andres, C.
AU - Betzer, A.
AU - Goergen, M.
AU - Renneboog, L.D.R.
N1 - Appeared earlier as CentER Discussion Paper 2008-67 (revised title)
PY - 2009
Y1 - 2009
N2 - 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.
AB - 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.
M3 - Article
SN - 0927-5398
VL - 16
SP - 175
EP - 187
JO - Journal of Empirical Finance
JF - Journal of Empirical Finance
IS - 2
ER -