Financial constraints and dividend policy

Pathan, Shams, Faff, Robert, Mendez, Carlos Fernandez and Masters, Nicholas (2015) Financial constraints and dividend policy. Australian Journal of Management, 41 3: 484-507. doi:10.1177/0312896214557835

Author Pathan, Shams
Faff, Robert
Mendez, Carlos Fernandez
Masters, Nicholas
Title Financial constraints and dividend policy
Journal name Australian Journal of Management   Check publisher's open access policy
ISSN 0312-8962
Publication date 2015
Year available 2015
Sub-type Article (original research)
DOI 10.1177/0312896214557835
Open Access Status Not Open Access
Volume 41
Issue 3
Start page 484
End page 507
Total pages 24
Place of publication London, United Kingdom
Publisher Sage Publications
Collection year 2016
Language eng
Abstract Using a sample of US listed firms over the 1989–2012 period, we find that financially constrained dividend-increasing firms experience superior short-run abnormal stock returns, but suffer worse operating performance compared to similar unconstrained firms. More specifically, constrained firms in more competitive industries realize poorer long-run and operating performance. Likewise, constrained firms that increase dividends during the financial crisis also deliver inferior post-dividend-increase long-run return than do unconstrained firms. We also find evidence that constrained firms show worse stock market reaction to new equity issue announcements following dividend increase, but display a positive market response if they potentially have high investment growth opportunities. Our results are robust to alternative financial constraint proxies and abnormal return measures.
Keyword Dividends
Financial contraints
Seasoned equity issues
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ
Additional Notes Published online before print May 5, 2015

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2016 Collection
UQ Business School Publications
Version Filter Type
Citation counts: TR Web of Science Citation Count  Cited 0 times in Thomson Reuters Web of Science Article
Scopus Citation Count Cited 0 times in Scopus Article
Google Scholar Search Google Scholar
Created: Fri, 27 Mar 2015, 11:12:40 EST by Karen Morgan on behalf of UQ Business School