Dividend Determinants in Denmark

Based on a total sample largely uncontaminated by share repurchases we find that the characteristics of dividend payers are: Positive earnings, high ROE (net earnings to book equity), low volatility in ROE, high retained earnings, large firm size, and whether the firm paid out dividends in the previous year. MV/BV, leverage and owner structure play no role in whether a firm pays dividends or not. Among the dividend payers the generosity of the payments (relative to market value of equity measured in fixed prices) is positively related to ROE and previous year's generosity with respect to dividend payments, and negatively related to concentrated owner structure and firm size. That is, the payer characteristics differ from the generous payer characteristics. In Denmark share repurchasers are also dividend payers. Compared to pure dividend payers these firms are larger, have higher ROE, lower growth and a more concentrated owner structure. Finally, the share repurchasers are also among the most generous dividend payers