1 Dividend Stickiness and the Determinants of the Propensity to Pay- International Evidence

- International Evidence It is generally assumed that dividend payers and non-payers are affected similarly by the determinants of dividend policy. By separating firms into payers and non-payers based on their prior payment status and using both a logit model and a hazard model, I find that there is strong dividend stickiness. Payers ’ propensity to pay dividends is affected positively by growth opportunities and effectiveness of quality protection but negatively by insider holding, while non-payers ’ propensity is affected oppositely by these determinants. Furthermore, payers are more sensitive to earnings and earned / contributed equity mix while non-payers are more sensitive to risk and dividend premiums. When dividend stickiness is taken into account, the decline in the propensity to pay dividends is reduced by more than 84%. Furthermore, while dividend premiums are not relevant in dividend policies for payers in countries other than the U.S., they do matter for non-payers in these countries