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Corporate Dividend Policies: Lessons from Private Firms

Corporate Dividend Policies: Lessons from Private Firms We compare the dividend policies of publicly and privately held firms in order to help identify the forces shaping corporate dividends, and shed light on the behavior of privately held companies. We show that private firms smooth dividends significantly less than their public counterparts, suggesting that the scrutiny of public capital markets plays a central role in the propensity of firms to smooth dividends over time. Public firms pay relatively higher dividends that tend to be more sensitive to changes in investment opportunities than otherwise similar private firms. Ultimately, ownership structure and incentives play key roles in shaping dividend policies. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Financial Studies Oxford University Press

Corporate Dividend Policies: Lessons from Private Firms

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Publisher
Oxford University Press
Copyright
© The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com.
ISSN
0893-9454
eISSN
1465-7368
DOI
10.1093/rfs/hhr108
Publisher site
See Article on Publisher Site

Abstract

We compare the dividend policies of publicly and privately held firms in order to help identify the forces shaping corporate dividends, and shed light on the behavior of privately held companies. We show that private firms smooth dividends significantly less than their public counterparts, suggesting that the scrutiny of public capital markets plays a central role in the propensity of firms to smooth dividends over time. Public firms pay relatively higher dividends that tend to be more sensitive to changes in investment opportunities than otherwise similar private firms. Ultimately, ownership structure and incentives play key roles in shaping dividend policies.

Journal

The Review of Financial StudiesOxford University Press

Published: Mar 2, 2012

Keywords: JEL G35 G32 G15

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