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Dividends: the end of history or is history starting again?

This section deals with the latest theories and empirical studies aimed at complementing previous research focused on dividend policy. We will first analyze alternative methods of dividend payments, such as share repurchases, to understand how they can (or cannot) be a substitute for a dividend payment (A). Then we will analyze the dynamics of dividend policy (B). Finally, we will focus on the relationship between a firm’s characteristics (through corporate governance) and dividend policy (C).






¹⁵ In a 2000 study, De Angelo and De Angelo suggest that there is a relationship between the performance of a company and its profits. Indeed, in the case of Mirror Company, the authors highlight that to recover its profitability the company used a range of restructuring measures, including layoffs, change in strategy and a significant dividend increase. This (dividend increase) can appear a priori paradoxical, but the reasoning is as follows: by paying dividends, corporate managers made the situation even more difficult, which would enable them to take very strong decisions to improve it. Undoubtedly they would not have taken such decisions if they had not previously increased the amount of dividend payments. This approach follows Jensen (FCF –free cash flow-) according to which the difficulty facilitates the restructuring measures which would not have been undertaken otherwise.

¹⁶ For Jensen (1986), the FCF is the cash-flow available after all the projects with positive NPV were engaged.

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