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Why Firms Do Not Pay Dividends: The Canadian Experience
Author(s) -
Baker H. Kent,
Chang Bin,
Dutta Shantanu,
Saadi Samir
Publication year - 2012
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12005
Subject(s) - dividend , dividend policy , profitability index , business , cash , stock (firearms) , order (exchange) , monetary economics , economics , financial economics , finance , mechanical engineering , engineering
Abstract: We use a survey approach to investigate the factors leading to the decision not to pay cash dividends in Canada. Our results show that Canadian managers perceive growth opportunities, low profitability and cash constraints as the major reasons underlying a firm's decision not to pay dividends. Questionnaire results also show that, for non‐dividend‐paying firms, taxation is at best a second‐order determinant of dividend policy and that stock repurchases are not substitutes for dividends. Finally, our findings are inconclusive regarding managers’ views on the relationship between dividend policy and stock prices and the signaling role of dividend policy.