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Dividend policy of SMEs: A variance decomposition approach

Author

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  • CADENOVIC, Jovana
  • PAELEMAN, Ine
  • DELOOF, Marc

Abstract

Previous research on dividend policies in privately held firms has been largely focused on the determinants of dividend policies which are identified at the firm-year, firm, and industry levels. Studying these effects in isolation would, however, provide an incomplete picture of the overall drivers of dividend policy. In this study we go a step further by analysing these effects simultaneously by applying a variance decomposition method to explore how much each level of the analysis contributes to dividend policy of Small and Medium Sized Enterprises (SMEs). Based on a sample of 110,050 Belgian SMEs, our data reveal that firm-year and firm-level differences explain most of the variance of dividend policies which is in line with the resource based theory. Industry-level differences and region differences matter very little for dividend policy of SMEs.

Suggested Citation

  • CADENOVIC, Jovana & PAELEMAN, Ine & DELOOF, Marc, 2023. "Dividend policy of SMEs: A variance decomposition approach," Working Papers 2023003, University of Antwerp, Faculty of Business and Economics.
    • Handle: RePEc:ant:wpaper:2023003
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    Keywords

    Dividend policy; SMEs; Variance decomposition;
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