IDEAS home Printed from https://ideas.repec.org/a/taf/apeclt/v16y2009i12p1201-1204.html
   My bibliography  Save this article

Why do financially distressed firms pay dividends?

Author

Listed:
  • Gil Cohen
  • Joseph Yagil

Abstract

In this study we use a sample of 334 S&P500 companies to examine the extent to which financially distressed firms pay dividends in order to attract investors. We find a higher dividend yield and a higher pay-out ratio for financially distressed firms than for financially stable firms. We also find that financially distressed firms tend to change the dividend per share more rapidly than stable firms. Furthermore, these firms' dividends depend more on earnings than do the dividends of stable companies. This finding is consistent with the frequent dividend changes observed in distressed firms. Stable firms, in contrast, prefer paying dividends that are less dependent upon earnings. These results may stem from the relatively high level of importance that financially distressed firms ascribe to dividend payments or to the aggressive dividend policy that eroded the firms' financial stability and forced them to reduce the dividend per share rapidly.

Suggested Citation

  • Gil Cohen & Joseph Yagil, 2009. "Why do financially distressed firms pay dividends?," Applied Economics Letters, Taylor & Francis Journals, vol. 16(12), pages 1201-1204.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:12:p:1201-1204
    DOI: 10.1080/17446540802389057
    as

    Download full text from publisher

    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/17446540802389057&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/17446540802389057?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Javier Bianchi, 2016. "Efficient Bailouts?," American Economic Review, American Economic Association, vol. 106(12), pages 3607-3659, December.
    2. Mar𨀠 Bel鮠Lozano, 2012. "Analysing the effect of excess cash accumulation on financial decisions," Applied Economics, Taylor & Francis Journals, vol. 44(21), pages 2687-2698, July.
    3. Mª Belén Lozano García, 2011. "Analyzing the Effect of Excess Cash Accumulation on Financial Decisions," Post-Print hal-00704672, HAL.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:16:y:2009:i:12:p:1201-1204. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEL20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.