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Voluntary zero-dividend paying firms: characteristics and performance

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  • Hyunseok Kim
  • Ju Hyun Kim

Abstract

We investigate the characteristics of ‘voluntary zero dividend paying’ firms and their subsequent performance. We define NDR_HP (no dividends or repurchases, with high profitability) firms as those with profits above the industry median and yet pay out zero dividends (including share repurchases). Signalling, agency, residual dividend, and life cycle theories explain firm characteristics and dividend payouts, to which we add the novel variables CEO overconfidence and market competition. We discover that growth opportunity, capital expenditure, and CEO overconfidence are positively related to NDR_HP. In addition, we find that the NDR_HP group outperforms all other groups in terms of future performance.

Suggested Citation

  • Hyunseok Kim & Ju Hyun Kim, 2019. "Voluntary zero-dividend paying firms: characteristics and performance," Applied Economics, Taylor & Francis Journals, vol. 51(50), pages 5420-5446, October.
    • Handle: RePEc:taf:applec:v:51:y:2019:i:50:p:5420-5446
    DOI: 10.1080/00036846.2019.1610713
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    Cited by:

    1. Nida Arshad & Fareeha Waseem & Syeda Fizza Abbas, 2022. "Factors Affecting Dividend Payout Ratio of Dividend Paying Firms Listed on KSE-100 Index," iRASD Journal of Management, International Research Alliance for Sustainable Development (iRASD), vol. 4(2), pages 164-183, june.
    2. Kalyani Mulchandani & Ketan Mulchandani & Sahil Singh Jasrotia, 2021. "Does gender diversity on firm’s board affect dividend payouts? Evidence from India," Future Business Journal, Springer, vol. 7(1), pages 1-11, December.
    3. Jennifer Kunz & Lara Sonnenholzner, 2023. "Managerial overconfidence: promoter of or obstacle to organizational resilience?," Review of Managerial Science, Springer, vol. 17(1), pages 67-128, January.
    4. Victor Dragotă & Camelia Delcea, 2019. "How Long Does It Last to Systematically Make Bad Decisions? An Agent-Based Application for Dividend Policy," JRFM, MDPI, vol. 12(4), pages 1-34, November.

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