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Payout policy in industrial and financial firms

Author

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  • Kent Baker, H.
  • De Ridder, Adri
Abstract
Using a sample of Swedish publicly listed firms between 1970 and 2013, we examine whether payout policy differs between industrial and financial firms. Specifically, we investigate whether payouts and their composition (primarily dividends and stock repurchases) differ between firms. We find that dividends are the major vehicle in distributing earnings to shareholders and also that payouts are more frequent for financial than industrial firms. Stock repurchases have not replaced dividends in Sweden. The total payout ratio, including dividends, stock repurchases, and other forms of cash distributions to shareholders relative to earnings are roughly the same for industrial and financial firms. Financial firms are more reluctant to cut or omit dividends than industrial firms. Our examination of dividend smoothing shows that although both industrial and financial firms smooth dividends, they tend to smooth less during the last two decades as indicated by an increase in the speed of adjustment.

Suggested Citation

  • Kent Baker, H. & De Ridder, Adri, 2018. "Payout policy in industrial and financial firms," Global Finance Journal, Elsevier, vol. 37(C), pages 138-151.
    • Handle: RePEc:eee:glofin:v:37:y:2018:i:c:p:138-151
    DOI: 10.1016/j.gfj.2018.05.005
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    References listed on IDEAS

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    More about this item

    Keywords

    Payout policy; Dividend smoothing; Sweden;
    All these keywords.

    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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