Please use this identifier to cite or link to this item: http://hdl.handle.net/1893/1525
Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: The dividend and share repurchase policies of Canadian firms: empirical evidence based on an alternative research design
Authors: de, Jong Abe
van, Dijk Ronald
Veld, Chris
Contact Email: c.h.veld@stir.ac.uk
Keywords: Dividends
share repurchases
payout decisions
nested logit models
questionnaire data
Issue Date: 2003
Publisher: Elsevier
Citation: de Jong A, van Dijk R & Veld C (2003) The dividend and share repurchase policies of Canadian firms: empirical evidence based on an alternative research design, International Review of Financial Analysis, 12 (4), pp. 349-377.
Abstract: We empirically investigate dividend and share repurchase policies of Canadian firms. Our analysis contains two features that are uncommon in finance, while they are encountered in other fields of science. First, we use standard, simultaneous and nested logit models. The non-standard logit models are often used in recreational economics and marketing. By examining different model specifications, we test alternative descriptions of the behavior of decision- makers. Second, we use questionnaire data on firm characteristics. Collecting data by questionnaires is hardly ever done in finance, while it is the mainstream approach in sociology and organization. We have sent a questionnaire to the 500 largest non-financial Canadian companies listed on the Toronto Stock Exchange, of which 191 usable responses were returned. Our results are consistent with a structure in which the company first decides whether it wants to pay out cash to its shareholders or not. In the second stage the firm decides on the form of the payout: dividends, share repurchases or both. Payout is determined by free cash flow. The choice for dividends and repurchases depends on behavioral and tax preferences. Furthermore, the payout is less likely to be dividends if the company has executive stock option plans. Finally, we find evidence for the Brennan and Thakor (1990) model. According to this model the existence of asymmetric information amongst outsiders is associated with a preference for dividend payments over share repurchases.
Type: Journal Article
URI: http://hdl.handle.net/1893/1525
URL: http://www.sciencedirect.com/science/journal/10575219
DOI Link: http://dx.doi.org/10.1016/S1057-5219(03)00030-9
Rights: Published in the International Review of Financial Analysis by Elsevier.
Affiliation: Erasmus University, Rotterdam
ING Investment Management, Netherlands
Tilburg University

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