A zero cash dividend policy: the UK experience

Baker, HK, Kilincarslan, E and Demiralay, S ORCID: https://orcid.org/0000-0003-2543-7914, 2024. A zero cash dividend policy: the UK experience. Review of Quantitative Finance and Accounting. ISSN 0924-865X

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Abstract

We investigate the perceptions of corporate managers of non-dividend-paying firms listed on the London Stock Exchange (LSE) to identify the factors and explanations leading to a zero cash dividend policy. Our survey evidence shows that the main reasons for not paying dividends involve poor profitability, the firm’s life cycle stage and profitable growth opportunities. Managers consider shareholder preferences when setting a zero cash dividend policy, but neither taxes nor share repurchases (as substitutes for cash dividends) explain this policy. High insider ownership and transaction costs also do not explain why some UK companies pay no cash dividends. However, respondents confirm that the cost of raising new external funds (debt) is an important factor in not distributing cash dividends. Our results are inconclusive on the potential signaling effect of not paying dividends. Finally, the findings indicate that the COVID-19 pandemic did not affect the decision to follow a zero cash dividend policy in the United Kingdom.

Item Type:	Journal article
Publication Title:	Review of Quantitative Finance and Accounting
Creators:	Baker, H.K., Kilincarslan, E. and Demiralay, S.
Publisher:	Springer
Date:	17 October 2024
ISSN:	0924-865X
Identifiers:	Number Type 10.1007/s11156-024-01362-5 DOI 2258085 Other
Rights:	This version of the article has been accepted for publication, after peer review (when applicable) and is subject to Springer Nature’s AM terms of use, but is not the Version of Record and does not reflect post-acceptance improvements, or any corrections. The Version of Record is available online at: https://doi.org/10.1007/s11156-024-01362-5
Divisions:	Schools > Nottingham Business School
Record created by:	Jonathan Gallacher
Date Added:	21 Oct 2024 09:35
Last Modified:	21 Oct 2024 09:35
URI:	https://irep.ntu.ac.uk/id/eprint/52439

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