Determinants trends of dividend distribution in the US

Abstract

In the US, larger, more profitable companies are more likely to pay dividends, as are firms whose retained earnings account for a significant portion of total equity. Levered firms are less likely to pay dividends due to their financial constraint. Conversely, firms with strong cash balances, thus less financially constrained, are prone to pay dividends. Moreover, risk exposure and cash-flow uncertainty negatively impact the propensity to distribute dividends, while the effects of investment opportunities and liquidity are rather weak in the 1972-2020 period. There are two crucial patterns, the downward trend from 1983 to 2001 and the subsequent recovery (2001-2014). In 1983 the fraction of dividend payers observed was 49%, before it decreases to only 26% by 2001 and finally bounces back to 39% by 2014. Concerning the dividend disappearance phenomenon, the change in firm characteristics explain 46% of the decreasing pattern observed while the remaining 54% is driven by the change in propensity to pay. In contrast, 80% of the increase in the total fraction of payers is attributable to the variation in firm characteristics, whereas the increasing propensity to pay dividends drive the remaining 20%.

Date of Award	24 Jan 2022
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Diana Bonfim (Supervisor)