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Are unsustainable dividend-payers punished by the market? Evidence from Swedish firms
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Business Studies.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Business Studies.
2019 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

We examine the phenomenon of firms that distribute dividends in excess of reported earnings, that is, 'unsustainable dividend-payers' in the Swedish market. Our hypothesis is that these firms will experience lower abnormal returns compared to their counterparts in both short and long term. With a dataset of 2061 observations from Nasdaq Stockholm and Nordic Growth Market during the period 1999-2017, we find that the abnormal returns are higher for unsustainable dividend-payers in the short term, while in the long run the result is on the opposite. Moreover, we find that the larger the difference between dividends paid and reported earnings, the higher the short-run abnormal returns but the lower the long-run abnormal returns to shareholders. Our results are robust to controlling for influences of other events on announcement dates and alternative measurement for model parameter, though not unambiguous. This study contributes to broadening the area of unsustainable dividends, which is perceived as a hot topic. It may be of interest to both individuals and institutions, who often have a longer-term perspective on their investments.

Place, publisher, year, edition, pages
2019. , p. 41
Keywords [en]
unsustainable, dividend-payers, dividends, earnings, abnormal return
National Category
Business Administration
Identifiers
URN: urn:nbn:se:uu:diva-386392OAI: oai:DiVA.org:uu-386392DiVA, id: diva2:1344748
Subject / course
Business Studies
Educational program
Master Programme in Business and Management
Supervisors
Examiners
Available from: 2019-08-26 Created: 2019-08-21 Last updated: 2019-08-26Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf