Dividend Policy Determinants of Australian Mcs and Dcs

This paper investigates the determinants of dividend policy for Australian DCs and MCs. In considering dividend payout ratios we adopt two definitions – cash dividends and total dividends. The cash dividend payout ratios consists of cash dividends to net earnings while total dividend payout ratios consists of both cash dividends and share repurchases to net earnings. The determinants of foreign exchange, tax clientele and financial slack are significant in explaining the difference of total dividend payout ratios between Australian DCs and MCs. Diversification, profitability, firm-specific risk, size, collateral value of assets and financial slack are the significant variables in explaining the difference in cash dividend payout ratios between Australian DCs and MCs. These results remain unaffected irrespective of controlling for industry and time effects.