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The effects of financial constraints on dividends and share repurchases : empirical evidence from the Netherlands

Wiersma, M. (2017) The effects of financial constraints on dividends and share repurchases : empirical evidence from the Netherlands.

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Abstract:This paper investigates the effect of financial constraints on dividend and share repurchases. Former studies found a negative effect for firms in the USA, but with e.g. different law systems and governance mechanisms this study will investigate if those results hold for Dutch firms. With a sample of 500 Dutch listed firms that were listed at least one year during the sample period 2010-2014 a series of multiple regression analyses are conducted. The results show that for the Dutch listed firms in the sample, financial constraints have no significant negative effect on dividend pay-out and share repurchase during the sample period. These results provide empirical support for the earlier findings that managers attach value to the signalling function of dividends and share repurchases, because even a severe event like financial constraints does not give evidence for lower pay-outs and repurchases. The results also give practical implication because more understanding of the behaviour of Dutch firms in times of financial constraints can help reduce information asymmetry that current and future investors often face.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:International Business Administration BSc (50952)
Link to this item:http://purl.utwente.nl/essays/72701
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