Tax And The Dividend Policy Of Dutch Firms Finance Essay

Chapter 1: Introduction

At the terminal of the summer of 2010 the Dutch Statistics Bureau published an article about the dividend payments of Dutch houses. The agency investigated the size of the payments during the first 6 months of 2010 compared with old periods. They discovered that despite of the crisis the companies had paid their stockholders more dividends than in the first 6 months of 2009.[ 1 ]

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Figure 1 shows us that Dutch listed companies paid their stockholders more than a‚¬ 10 billion in dividends in 2009. During 2010 that sum grew to more than a‚¬ 11 billion. This a‚¬ 1 billion addition is non due to the fiscal companies like Bankss, insurance companies and the fiscal services sector. These companies had to endure from deteriorated balance ratios which forced them to cut dividend payments. In contrast during the old ages 2005-2008 the norm paid out sum was circa a‚¬ 18 billion.

Figure: The entire sum of dividends paid by Dutch listed companies. A differentiation is made between fiscal and non-financial companies. Banks, insurance companies and the fiscal services sector are considered fiscal companies. Source informations: statline.cbs.nl

Beginning: In 2007, the twelvemonth before the crisis truly began, Dutch fiscal companies paid out a‚¬ 8,5 billion in dividends to their stockholders. In 2008, the twelvemonth that Lehman Brothers was declared bankrupt, the paid out sum decreased to about a‚¬ 6 billion. After 2008 dividends were cut drastically to a‚¬ 182 million in 2009 and a‚¬ 183 million is 2010.

In 2010 more than 26 % of the dividend was paid as choice-dividend. This is significantly more than in 2008 and 2009. In these old ages severally 10 % and 9 % of the sum paid out dividend was choice-dividend.

Because of the economic downswing it is more hard for companies to acquire funding for investings or acquisitions. By offering stockholders the pick between hard currency dividend and pick dividend companies hope to maintain a proportion of het paid out dividends invested in the company.

Figure 2: The proportion of the paid out dividend by Dutch listed houses in choice-dividend compared to hard currency dividend.

Beginning informations: statline.cbs.nl

Harmonizing to the dividend price reduction theoretical account by Gordon ( 1959 ) stocks should be valued by dismissing future hard currency flows utilizing the rate of return investors require. Harmonizing to this theoretical account portions monetary values should fall by precisely the paid sum after a dividend payout. Several surveies examine that this is non the instance. Elton and Gruber ( 1970 ) analyze this phenomenon and semen with an account. They suggest that investors merely care about after revenue enhancement returns.

In this thesis I investigate the consequence of a alteration in the dividend revenue enhancement per centum in the Netherlands on the dividend policy of Dutch houses. At the first of January 2007 the dividend revenue enhancement per centum in the Netherlands is lowered from 25 % to 15 % . Harmonizing to Elton and Gruber the lower dividend revenue enhancement per centum makes the paid out dividend more valuable for investors. After dismissing the annually after revenue enhancement dividend payments, which have grown utilizing the lower revenue enhancement per centum, the discounted portion monetary value should increase.

The lower dividend revenue enhancement per centum is merely applicable on Dutch houses, therefore I am chiefly concentrating on Dutch houses in this thesis. As sample I use the paid out dividend sums of all Dutch listed houses during the last 10 old ages.

My chief research inquiry is the undermentioned: “ Does the Dutch dividend revenue enhancement per centum influence the dividend policy of Dutch houses? ”

Chapter 2: What is dividend?

2.1 Dividend

When an investor invests in a company he expects to have something in return. This could be done via dividend or by capital additions. Dividend is the payment made by a company to its stockholders out of the current or maintained net incomes. Dividend is normally paid yearly or semi yearly. Not all companies pay dividend. This normally relates to the stage the company is in. When a company is in its turning stage it normally needs all of its net income to reinvest in new undertakings. Alternatively of paying dividends companies can take to reinvest in the house. When the chosen undertaking has a positive NPV the investing creates value for the stockholder.

In the debut we have seen that hard currency dividend is the chief signifier of dividend. Alternatively houses can take to offer their stockholders the pick between having dividends in hard currency or in stock. This policy could be referred to as pick dividend.

Alternatively of paying out dividend a company can make up one’s mind to utilize the dividend sum to purchase back portions. This scheme does non take to an addition in the value of the stock because the company uses it ain assets to purchase back the portions. The lessening in value of the portions is offset by the lessening the in figure of portions. Because the figure of portions outstanding decreases the future dividends per portion additions. This addition compensates stockholders for non having dividend today.[ 2 ]Share redemptions are taxed on a capital addition footing.[ 3 ]

2.1.1 Dividend policy

The manner in which a company handles dividend payment is known as dividend policy. Lintner ( 1956 ) surveies the dividend policies of houses. He bases his study on interviews with the directors of 28 houses. Based on these interviews Lintner makes some of import observations. First, houses are chiefly concerned with the stableness of their dividend payments. Second, net incomes are the most of import determiner for the degree of dividend. Third, the dividend policy was set foremost if subsequently turned out there were deficient internal financess, external financess were used to shut the spread. Based on his findings Lintner develops a theoretical account which captures the most of import elements of company ‘s payout policies. With this theoretical account he is able to explicate 85 % of the dividend alterations of his sample houses.

Lintner ‘s theoretical account

D*it = I±i Eit

Dit – Di ( t-1 ) = ai + curie ( D*it – Di ( t – 1 ) ) + uit

D*it is the coveted dividend, I±i is the mark payout ratio, Eit are the net incomes of the house during period T.

Dit is the existent dividend, Di ( t-1 ) is the dividend of the old twelvemonth, Army Intelligence is a changeless relating to dividend growing, curie is the partial accommodation factor, uit is an error term.

Fama and Babiak ( 1968 ) have extensively tested the theoretical account of Lintner. They use the information of 392 big industrial companies during the period 1946 until 1964. They conclude that Lintner ‘s theoretical account works good. Other surveies confirm this, like Miller ( 1980 ) . He concludes that dividend cuts are one of the last resorts a director would utilize. Because when this happens out of the blue the market perceives this as negative information about the future net incomes of a company. Pinkerton ( 1984 ) every bit good as Eades, Hess and Kim ( 1985 ) find that the reaction of investors to dividend cuts is far stronger than to dividend additions. This supports directors desire to flatten dividend payments.

2.1.2 Dividend development

Grullon and Michaely ( 2002 ) look into the development of dividend payments versus portion repurchases over the period 1972-1998. They use a sample of 121.973 companies. Figure 3 Tells us that the average sum payout over the period 1972-1998 has been stable at circa 25 % of net incomes.

Figure 3: This figure depicts the distribution as a per centum of net incomes by payout method of 121.973 US houses. Beginning: Compustat by Grullon and Michaely ( 2002 )

The division of the entire payout between dividend payments and redemptions has changed. In 1972 merely 10 % of the distributed net incomes were distributed utilizing redemptions. In 1998 redemptions accounted for more than 50 % of the paid out net incomes.

Figure 4 shows us that in 1972 70 % of the companies distributed wealth to their investors merely utilizing dividends. 10 % of the paying out houses merely used redemptions. 20 % used both methods. Since 1972 distribution utilizing dividend dropped to merely 25 % . While 40 % of the wealth is distributed utilizing portion redemptions. 35 % of the houses use both methods.

Figure 4: This figure depicts the distribution of houses by dividend or portion repurchases over the period 1972-1998 of 121.973 US houses. Beginning: Compustat by Grullon and Michaely ( 2002 )

Clearly dividend redemptions have become progressively popular in this period. Grullon and Michaely conclude that because the figure of houses administering hard currency has been about changeless over clip redemption have been replacing dividends. This decision is supported by Fama and French ( 2000 ) .

2.1.3 Empirical Factors

Allen and Michaely ( 2003 ) mentioned six empirical observations which play an of import function in the treatment of payout policies:

1. Large, established corporations typically pay out a important per centum of their net incomes in the signifier of dividends and redemptions.

2. Historically, dividends have been the prevailing signifier of payout. Share redemptions were comparatively unimportant until the mid-1980s, but since so have become an of import signifier of payment.

3. Among houses traded on organized exchanges in the U.S. , the proportion of dividend-paying houses has been steadily worsening. Since the beginning of the 1980s, most houses have initiated their hard currency payment to stockholders in the signifier of redemptions instead than dividends.

4. Persons in high revenue enhancement brackets receive big sums in hard currency dividends and pay significant sums of revenue enhancements on these dividends.

5. Corporations smooth dividends comparative to net incomes. Redemptions are more volatile than dividends.

6. The market reacts positively to proclamations of redemption and dividend additions, and negatively to proclamations of dividend lessenings.

2.1.2 Do investors desire dividend?

This is one of the cardinal inquiries in the research into dividend policy. Some investors think that stock that do non pay dividend should non be held. Or the portion monetary value should be lower compared to similar portions that do pay dividend. Harmonizing to Black ( 1976 ) this is non a rational belief. If you add these investors to the corporations that have revenue enhancement grounds to prefer dividend paying stocks and to legal guardians who believe it is non wise to keep non-dividend-stocks you have a large portion of the market that can act upon the monetary values of corporate portions.

Blume, Crockett and Friend ( 1974 ) found that investors in high revenue enhancement brackets seem to keep low-dividend stocks and investors in low revenue enhancement brackets seem to keep high-dividend stocks.

In paragraph 2.2 I will depict the most relevant dividend policy theories. These dividend theories look at the dividend mystifier from several angles. Black ( 1976 ) calls the fact that corporations pay out big sums of dividend despite the being of the comparatively inexpensive, in footings of revenue enhancement charges, repurchases option, the “ dividend mystifier ” .

2.1.3 Why do houses pay dividend?

DeAngelo, DeAngelo and Stulz ( 2004 ) give the undermentioned account: “ Earned equity has an economically more of import impact on the dividend determination than do profitableness or growthaˆ¦ houses pay dividends to extenuate the bureau costs associated with the high cash/low debt capital structures that would finally ensue if they did non pay dividends. ”

Fama and French ( 2000 ) found that the 3 basicss ; profitableness, investing chances and size are factors in the determination to pay dividends. They find that dividend paying houses are normally big profitable houses. Firms that have ne’er paid out dividend tend to be smaller and seem to be less profitable, but they have more investing chances. And their investing spendings are much larger than their net incomes.

The feature of former dividend remunerators are low earning and few investings. The steady diminution of dividend paying houses after 1978 is partially due to a displacement in the population of publically traded houses toward the features of houses that have ne’er paid any dividend. The beginning of this displacement is found is freshly listed houses after 1977. These houses differ from earlier listed houses. During the first portion of the period 1963-1998 new listings tend to be little profitable houses with a batch of investing possibilities. After 1977 new listed houses continue to be little and to turn quickly, but their profitableness decreased. This bead in profitableness of freshly listed houses after 1977 makes freshly listed dividend paying houses rare.

2.2 Dividend theories

Modigliani Miller – Dividend Irrelevance Theory

With the dividend Irrelevance Theory Modigliani Miller ( 1961 ) speculate that dividend policy is irrelevant. This means that in a perfect capital market stockholders are apathetic about the manner companies distribute their net incomes to their stockholders. A capital market is considered perfect when there are no dealing costs, no revenue enhancements, symmetric information, the market is complete and there are complete undertaking possibilities.

The thought of this theory is that stockholders can make up one’s mind for themselves how much dividend they want to have. If they received hard currency dividend which they considered to be excessively much, they can utilize the excess to purchase more portions. When the investor received dividend which he considered to be excessively small he can sell portions. This ultimately leaves him with the same place compared to when the company would hold paid the dividend sum the stockholder expected. In the instance of a portion redemption when the stockholder expects to have dividend, he can sell portions. The same goes for stock dividend. If the stockholder prefers hard currency dividend he can merely sell the portions he received. Independent of the used dividend policy the stockholder can ever retroflex the hard currency flow he expected.

Harmonizing to this theory the house value is determined by taking optimum investings. The net final payment is the difference between net incomes and investing. Thus the net final payment is merely a residuary. The degree of dividend can take any value but can ever be offset by the degree of portion issue. Thus the house value can non be affected by the dividend policy. The lone thing that affairs is the investing policy of the house.

Gordon and Lintner – Bird-in-the-hand-theory

The bird-in-the-hand theory by Gordon and Lintner ( 1959 ) states that dividend policy is relevant. The return on a stock consists of dividend output and capital addition. Normally a company pays out portion of its net income to investors and reinvests the other portion in the company. Gordon argues that investors would necessitate a higher rate of return on their investing because of the keeping of net incomes. This keeping increases the invested sum. Besides the uncertainness associated with this addition in investing relation to the safety of dividend increases the needed rate of return. On the other manus the keeping and reinvesting of the net incomes will take to an addition in the future dividend watercourse. Harmonizing to Gordon this addition in dividend watercourse will non counterbalance for the higher rate of return investors require.

The name of this theory is derived of the known adage “ A bird in the manus is better than two in the shrub, ” which means that it is better to lodge with something you already have, than prosecuting something you may ne’er acquire. Obviously “ the bird in the manus ” refers to the dividend you receive sporadically and the “ two in the shrub ” refers to the capital additions you are roll uping but might ne’er acquire.

Litzenberger and Ramaswamy – Tax-preference theory

Harmonizing to the Tax-Preference Theory by Litzenberger and Ramaswamy ( 1979, revised in 1980 & A ; 1982 ) investors prefer capital addition over dividend due to revenue enhancement considerations. This is partly caused by the fact that the revenue enhancement rate on capital addition in most states is lower than the revenue enhancement rate on dividend. Probably most of import is the fact that investors have to pay dividend revenue enhancement straight. While in some states with a capital addition revenue enhancement the existent revenue enhancement payment has to be made at the minute of sale. So you can state that capital addition revenue enhancements can be deferred by keeping on the investing. While dividend revenue enhancement payments have to be paid instantly. Obviously the present value of future capital addition revenue enhancement payments is well lower than paying revenue enhancement on standard dividends each period.

2.3 Review of the Modigliani-Miller Dividend Irrelevance Theory

In 1961 Franco Modigliani and Merton Miller published an article in which they province that under certain conditions a dividend policy is irrelevant. Today, 50 old ages subsequently, this theory still forms the footing for the modern thought on capital construction. Since its publication many articles have been written about this irrelevancy theory.

The theory states that in absence of revenue enhancements, dealing costs, bureau costs and asymmetric information and in an efficient market the manner a house is financed does non impact the value of the house. Therefore it does non count if a company is financed publishing equity or by debt. Besides it does non count what the dividend policy of the house is. In absence of revenue enhancements, dealing costs etcetera, the investor can make his ain dividend by selling portions to retroflex his coveted degree of dividend. Because the investor is apathetic between having and non having dividend, dividend policy is irrelevant. The lone thing that affairs is the investing policy. Equally long as the investing policy remains the same, dividend policy is irrelevant.

The state of affairs described in the old paragraph merely holds when there are no dealing costs and no revenue enhancements. In the existent universe, this thesis focuses in peculiar on the market in the Netherlands, markets are non perfect. Taxs exist every bit good as dealing costs.

Black ( 1976 ) describes some alternate ways for a house to administer hard currency to their stockholder. 1 ) By purchasing back some of its portions. This method has the advantage that most investors are non taxed as to a great extent on portions sold as they are on dividends received. 2 ) If the portions of the house are closely held the house could administer money to the investors by giving them occupations with hyperbolic wages. Or by telling goods at hyperbolic monetary values from other companies owned by the peculiar stockholder. 3 ) If the portions of the house are non closely held, another house can do a stamp offer. This will hold the same consequence of doing it closely held. After the acquisition some of the antecedently mentioned methods can be used to administer hard currency.

The Modigliani Miller theory merely holds in perfect markets. When 1 on the standards of a perfect market is violated a alteration in dividend policy can impact the value of the house.

Perfect and complete capital markets have the undermentioned elements:

No revenue enhancements

Symmetrical information

Complete catching possibilities

No dealing costs

Complete markets

Taxes – If dividends are taxed at a higher rate than capital additions, investors can non utilize dynamic trading schemes to outrun this higher revenue enhancement rate. In this instance minimising dividends is optimum. If dividends are taxed at a lower rate than capital additions, maximising dividends is optimum.

No revenue enhancements – In instance there are no revenue enhancements it is irrelevant if the house pays out dividends or redemptions portions. The value to the stockholder is the same.

Asymmetrical information – Directors are insiders, they are likely to cognize more about the current and future chances of the house. They can utilize dividends to intentionally opportunity the market ‘s position of a house.

Dividend cuts can take to a bead in the portion monetary value, while an addition in dividend can take to an addition in value of the stock. However with asymmetric information, dividends can besides be viewed as bad intelligence. Bad intelligence associating to a deficiency of positive NPV undertakings to put in.

Symmetrical information – All the participants, including the house, ever have precisely the same information.

Incomplete contracts – If contracts are uncomplete or non to the full enforceable, equity holders can, under some fortunes, utilize dividends to train directors or to expropriate wealth from debt holders. A high payout ratio forces directors to be more disciplined in the usage of the house ‘s resources and accordingly increase steadfast value.

Complete contracts – There is no bureau job between the directors and the security holders. Directors could be motivated through the usage of enforceable contracts.

Transaction costs – If a house distributes hard currency to its stockholders utilizing a portion redemption and these stockholders would desire to have hard currency alternatively, they have to sell portions. By selling portions they have to pay dealing costs. If the house pays dividend alternatively, the investor receives his hard currency instantly without holding to pay the dealing costs for selling portions. Therefore, if dividend payments minimise the dealing costs for investors, paying dividend may be optimum.

Firms can administer money through dividend or through issuing equity. If the natation costs are high, every clip a house goes to the capital market the value of the house will diminish. Therefore a opportunity in dividend policy can alter the house ‘s value.

No dealing costs – If there are no dealing costs for selling portions equity holders are apathetic between a house administering money through portion redemptions or dividends. For the investor they are worth the same.

Incomplete markets / Institutional restraints – Trading chances are limited. Institutions could avoid puting in none of low dividend paying stocks because of legal limitations, the direction of these none or low paying dividend companies may be forced to pay dividends despite the revenue enhancement load it imposes on single investors.

High dealing costs could take to uncomplete markets every bit good. Investors with small capital necessitate a higher return to counterbalance for paid dealing costs.

Chapter 3: Tax

The difference between the Dutch dividend revenue enhancement per centum and the capital addition revenue enhancement per centum is relevant in this paper. In this chapter I will briefly outlay how the Dutch IRS dainties dividend and capital additions. For comparative grounds I besides briefly explicate how in environing states and in the United States dividends and capital additions are treated.

3.1 The revenue enhancement state of affairs in the Netherlands

Dividend revenue enhancement: In 1965 the dividend revenue enhancement was introduced in the Netherlands. Until the twelvemonth 2006 it was set at 25 % . From January 1st 2007 the dividend revenue enhancement rate was lowered to 15 % . The dividend sum company ‘s wage out to their stockholders is the sum after dividend revenue enhancement. The dividend portion is paid straight to the Dutch IRS. In the revenue enhancement study which you have to make full in at the terminal of the twelvemonth you can subtract the dividend revenue enhancement you have paid during the twelvemonth from your nonexempt income. How much of the paid revenue enhancement can be deducted depends on the income you receive.[ 4 ]

Tax on capital addition: In the Netherlands there is no existent capital addition revenue enhancement like in the United States or the United Kingdom, as mentioned subsequently on. Alternatively there is a level revenue enhancement. This level revenue enhancement per centum consists of a “ theoretical capital output ” of 4 % which is taxed at 30 % . This means that all your belongings and nest eggs, your primary place excluded, are taxed at the 1,2 % revenue enhancement degree. The one-year exempt is set at a‚¬ 20.785.[ 5 ]

3.2 Foreign revenue enhancement state of affairss

France In France the applicable revenue enhancement rate on dividends is 25 % . Capital additions are taxed at 31,3 % . This per centum comprises capital additions revenue enhancement of 19 % and a 12,3 % societal charge.[ 6 ]

Germany German citizens are capable to a dividend revenue enhancement of 25 % . Capital additions on stocks that have been held for more than 1 twelvemonth are exempt from revenue enhancement. Capital addition on portions with a value less than 1 % of the sum invested sum are taxed at 25 % , if the invested sum is more than 1 % of the portfolio the addition is taxed at 15 % .[ 7 ]

United Kingdom In the United Kingdom dividend is taxed at a progressive revenue enhancement rate. Dividends up to ? 37.400 are charged at a 10 % rate, from ? 37.400 up to ? 150.000 at 32,5 % and everything above ? 150.000 is taxed at 42,5 % .[ 8 ]Capital additions above the exempt of ? 10.100 are charged at a level rate of 18 % .[ 9 ]

United States In the United States short term capital additions and dividends are added to the nonexempt income. The revenue enhancement rate on nonexempt income varies from 15 % up to $ 50.000 to 35 % for income above $ 379.150. For long term investings, longer than 12 months, the capital addition revenue enhancement rate is set at 15 % .[ 10 ]

Chapter 4: Datas / consequences

The information is collected from Datastream and consists of the paid out dividend of 134 Dutch companies over the period 2001-2011.

Note for run intoing with Francisco:

Harmonizing to the informations non all the companies paid dividend each twelvemonth. Could be because of the listing of the company started after 2001? See informations attached. How to manage those? Filter them from informations? ( 23 of 134 )

Average paid out dividend of companies from informations with empty records filtered out.

Chapter 5: Empirical research

Decision

Mentions

Allen, F. and Michaely, R. ( 2002 ) , “ Payout Policy ” , Handbook of the Economics of Finance, figure 1-07, chapter 07, pages 337-429, 2003.

Benesh, G. A. , Keown, A. J. , Pinkerton, J. M. ( 1984 ) , “ An Examination of Market Reaction to Substantial Shifts in Dividend Policy ” , The Journal of Financial Research, Vol. 7, No. 2, Summer 1984, pages 131-142.

Bernheim, D. B. ( 1991 ) , “ Tax policy and the dividend mystifier ” , The RAND Journal of Economics, Vol. 22, No. 4, pages 455-476.

Black, F. ( 1976 ) , “ The dividend mystifier ” , The Journal of Portfolio Management, Vol. 2, No. 2: pp. 5-8, Winter 1976.

DeAngelo, H. , DeAngelo, L. and Stulz R. ( 2004 ) , “ Dividend Policy, Agency Costs, and Earned Equity / Dividend policy and the earned/contributed capital mix: a trial of the life-cycle theory ” , Journal of Financial Economics 81, 2 ( 2006 ) , pages 227-254.

Eades, K. , Hess, P. and Kim, E. ( 1985 ) , “ On construing returns during the ex-dividend period ” , Journal of Financial Economics, No. 13, pages 3-34.

Emery, D. R. , Finnerty, J.D. and Stowe, J.D. ( 1998 ) , “ Principles of fiscal direction ” , 3rd edition.

Espen Eckbo, B. ( 2008 ) , “ Empirical enchiridion of corporate finance ” , Volume 2, chapter 9 Dividends.

Fama, E. E. and Babiak, H. ( 1968 ) , “ Dividend policy: an empirical analysis ” , Journal of the American Statistical Association, Vol. 63, No. 323, pages 817-836, September 1968.

Fama, E. and French, K. , ( 2000 ) , “ Disappearing dividends: altering house features or lower leaning to pay? ” , Journal of Financial Economics 60, pages 3-43, April 2001.

Fuller, K.P. and Goldstein, M.A. ( 2005 ) , “ Do Dividends Matter More in Worsening Markets? “ , Vol. 17, Issue 3, June 2011, pages 457-473.

Gordon, M. J. ( 1959 ) , “ Dividends, net incomes and stock monetary values ” , The Review of Economics and Statistics, Vol. 41, No. 2, Part 1, May 1959, pages 99-105.

Grullon, G. and Michaely R. ( 2002 ) , “ Dividends, portion redemptions and the permutation hypothesis ” , Journal of Finance, Vol. 57, pages 1649-1684, 2002.

Lintner, J. ( 1956 ) “ Distribution of incomes of corporations among dividends, retained net incomes, and revenue enhancements ” , American Economic Review, Vol. 46, May 1956, pages 97-113.

Litzenberger, R. H. , and Ramaswamy, K. ( 1979 ) , “ The effects of personal revenue enhancements and dividends on capital plus monetary values: theory and empirical grounds ” , Journal of Financial Economics, Vol. 7, Issue 2, pages 163-195, June 1979.

Litzenberger, R. H. , and Ramaswamy, K. ( 1980 ) , “ Dividends, short merchandising limitations, revenue enhancement induced investor patronage and market equilibrium ” , Journal of Finance, Vol. 25, pages 469-482.

Litzenberger, R. H. , and Ramaswamy, K. ( 1982 ) , “ The effects of dividends on common stock monetary values: revenue enhancement effects or information effects? “ , Journal of Finance, Vol. 37, pages 429-443.

Mann, S. V. ( 1989 ) , “ The Dividend Puzzle: A Progress Report ” , Quarterly Journal of Business and Economics 28, Vol. 52, No. 3, summer 1989, pages 3-35.

Modigliani, F. and Miller, M. ( 1958 ) , “ The cost of capital, corporation finance and the theory of investing ” , American Economic Review, Vol. 48, No. 3, pages 261-297.

Modigliani F. and Miller Merton H.A ( 1961 ) , “ Dividend Policy, Growth, and the Valuation of Shares ” , The Journal of Business, Vol. 34, No. 4, pages 411-433, October 1961.

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