How profitability and debt influence dividends’ payout policy in the U.K., France and Portugal

• Autor(a) principal: Moitinho, Ricardo João Martins Pereira
• Data de Publicação: 2008
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/664
• topic: Dividends; Debt; Investors’ protection; Dividendos; Endividamento; Protecção de investidores

The goal of this thesis is to investigate how profitability and debt influence the dividends’ payout policy of companies of three European countries: Portugal, France and the U.K. Using work of La Porta et al. (2000) as a starting point, this thesis not only validates the “outcome model“ described by La Porta et al. (2000) but also finds two factors that affect dividends’ payout level: debt and activity type. By comparing companies’ dividend payout policy in the three countries, this thesis confirms that the U.K., a common law country, has the highest dividends level and that dividend payout policy is a consequence of effective investor protection by law, as claimed by La Porta et al. (2000). This thesis also subscribes the latter’s idea that in common law countries, fast growth firms pay lower dividends than slow growth firms, meaning that protected shareholders are willing to wait for their dividends when investment opportunities are good. Poorly protected investors seem to take whatever dividends they can get, regardless of investment opportunities. Testing the factors that might affect dividend payout level indicates that there is a positive relation between debt level and dividend policy, and that companies’ activity type influence dividends. The former, however, raises some controversy as it contradicts some of the findings of previous studies.