Dividend policy following mergers and acquisitions

: european evidence

Abstract

This study finds evidence for the clientele effect of dividends in a European setting. I take advantage of M&A-transaction related changes to a firm’s shareholder base to confirm that acquiring shareholder adjust their dividend policy toward that of the target, thereby catering to the newly inherited shareholder preferences. Further, I analyze the impact of country-specific differences in governance regimes as well as in geographical and cultural distance on the mentioned dividend adjustment effect. When the acquirer comes from a relatively stronger governance regime, catering to target investor preferences is less pronounced whereas greater geographical and cultural distance causes the opposite effect. Moreover, my sample covering 1,046 transactions that took place between 01/01/1990 and 31/12/2017 suggests that higher differences in pre-merger dividend policies between target and acquirer reduce the likelihood of stock as payment method.

Date of Award	8 Jul 2021
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Thomas David (Supervisor)