Discussion Paper

No. 2019-41 | July 02, 2019
Dividend payout ratio follows a Tweedie distribution: international evidence

Abstract

Dividend policy is still a largely discussed issue in corporate finance literature. One of the main indicators used in analysing the dividend policy is the dividend payout ratio. Using a database consisting of 12,085 companies operating in 73 countries, for the period 2008–2014, the authors found that the dividend payout ratio follows a Tweedie distribution, and not a normal one. This distribution is stable over time for the entire analysed period. In addition, it describes the case of almost all the countries included in the sample. Thus, a better estimation of the probability that dividend payout ratio is lower or higher than a benchmark can be provided. Also, an analysis of dividend policy, distinctly considering payer versus non-payer companies, can offer additional important information for both practitioners and academics.

Data Set

JEL Classification:

G35, C01, C51, C55

Assessment

  • Downloads: 266

Links

Cite As

Victor Dragota, Daniel Traian Pele, and Hanaan Yaseen (2019). Dividend payout ratio follows a Tweedie distribution: international evidence. Economics Discussion Papers, No 2019-41, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2019-41


Comments and Questions


Anonymous - Referee Report 1
August 29, 2019 - 12:12

In my opinion paper “Dividend Payout Ratio Follows a Tweedie Distribution: International Evidence” describes very important and difficult problem. Subject is well known in literature but still interesting for readers. The authors analyze the relationship between the dividend payout ratio and financial ratios in assumption that the dividend payout ...[more]

... ratio distribution follows a Tweedie distribution. Authors use very interesting methodology (data and statistical method) and sufficient to proof papers hypothesis. The results of testing depend highly on financial indicator selected for analysis. There is very good reference to other papers, but without detailed treatment of selection procedure and literature overview supporting this procedure.

I recommend to:
- add the argument to financial indicators selection and reasoning for their representativeness in this case,
- explain why (what's new) your methodology is much better and / or different from the methodology used in the literature,
- more clearly, explain and emphasize the contribution to science and hypotheses,
- conclusion should be extended. (Limitation e.g. problem with accounting standards and tax law in different countries and sectors, what is advantages and disadvantages of this analysis). Finally the conclusion section should summarize your research and optionally provide guidance for the future research

Generally, I recommend publishing this article. Of course, my comments are only my opinion and do not affect the high value of this research.


Victor Dragota - Reply to Referee Report 1
September 03, 2019 - 19:24

We wish to thank for the useful suggestions provided by the anonymous referee. We hope that we will improve the quality of our paper, taking into account these suggestions.
Indeed, the results of testing highly depend on the financial indicator selected for analysis. In our paper, we are concerned ...[more]

... about dividend payout ratio (DPR). The main reason for choosing this indicator is its informative power. It is the indicator used most in the financial literature describing dividend policy. In the second draft of our paper, (1) we will insist more on the importance of dividend payout ratio for describing dividend policy (a more sounded argumentation for the selection of dividend payout ratio and its representativeness) and (2) we will mention - as a limitation - that the results are valid only for dividend payout ratio.
We will include more details regarding the treatment of selection procedure and literature overview supporting this procedure.
Also, in the revised version we will update the methodology in order to show the novelty/originality.
We have mentioned in the introduction of our paper that, using a better fit for the distribution (the Tweedie one), a better estimation of the probability that the event to occur (e.g., DPR to be lower or higher than a benchmark) can be provided. Also, an analysis of dividend policy, distinctly considering payer versus non-payer companies, can offer additional important information for practitioners and academics. In the second draft of our paper we will insist more (and clearer) on the contribution of the paper to science and hypothesis.
We agree that the conclusions should be extended, according to the suggestions of the first referee. We will consider all these issues in the second draft of our paper. Accounting rules are different from country to country (Chui 2002; Dragotă et al. 2018) and from sector to sector. Fiscal systems are also different and they can have an impact on financial decisions (Chui 2002; Dragotă et al. 2018), including dividend policy (Fidrmuc and Jacob 2010). We will insist more on the advantages and disadvantages of the analysis. Also, conclusions will be extended to summarize better our research and to include some future directions for our study.

Victor Dragotă
Daniel Traian Pele
Hanaan Yaseen

References:
Chui, A. C. W.; Lloyd. A. E.; Kwok, C. C. Y. (2002): The Determination of Capital Structure: Is National Culture a Missing Piece to the Puzzle? Journal of International Business Studies, 33(1): 99-127.
Dragotă I.M., Dragotă V., Curmei-Semenescu A., Pele D.T. (2018): Religion and Capital Structure: Some international evidences. Acta Oeconomica 68 (3): 415-442.
Fidrmuc J., Jacob M. (2010): Culture, Agency Cost and Dividends. Journal of Comparative Economics 38: 321-339. doi: 10.1016/j.jce.2010.04.002.