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Hard Times or Great Expectations? Dividend Omissions and Dividend Cuts by UK Firms *
Author(s) -
Benito Andrew,
Young Garry
Publication year - 2003
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/j.1468-0084.2003.00060.x
Subject(s) - dividend , panel data , leverage (statistics) , economics , dividend policy , dividend tax , cash flow , monetary economics , investment (military) , dividend payout ratio , probit model , business , financial economics , econometrics , finance , tax reform , state income tax , public economics , gross income , machine learning , politics , computer science , political science , law
This paper uncovers an increasing proportion of quoted UK companies omitting cash dividends. Using a large panel of quoted UK firms, we estimate panel data probit models for the incidence of dividend omissions and cuts as functions of financial characteristics including cash flow, leverage, investment opportunities, investment and company size. These variables account for most of the increase in omission since 1995. There is relatively little evidence to link this to the major tax reform of 1997 that abolished tax refunds on dividend income payable to tax‐exempt institutions. Significant persistence effects indicate companies are slow to adjust their balance sheets through their dividend.