Dividend Policy across Countries

AbstractThe payment of dividends by firms remains a quandary for finance scholars because of tax implications for value and the near substitutability of repurchases. A review of the literature on international dividend policy does not suggest an answer to this paradox, but it does provide evidence that supports several important conclusions. First, the evidence fails to support a dominant explanation for why firms pay dividends. Rather, the existing empirical work suggests that there are elements of numerous theories present in the global payment of dividends. Second, the literature shows that what are often presented as stylized facts about dividends are really U.S. results and fail to hold for other countries. Finally, the literature reveals the importance of factors beyond the economic and financial on the design of corporate dividend policies. Increasingly, the empirical evidence shows that cultural, legal, and behavioral factors exert important influences on managerial decisions about dividends.