Market Risk-Adjusted Dividend Policy and Price-to-Book Ratio

Tarek Ibrahim Eldomiaty
  • SSRN Electronic Journal, January 2012, Elsevier
  • DOI: 10.2139/ssrn.2188548

Market Risk-Adjusted Dividend Policy and Price-to-Book Ratio

What is it about?

This paper investigates the impact of both systematic and unsystematic risks on the dividend policy of 563 and 603 listed and delisted nonfinancial firms in the UK respectively. The data cover the period from 1992 to 2011. The authors propose a mathematical structure that presents a new measure of risk-adjusted dividends per share.

Why is it important?

The paper investigates the dividend behavior of delisted firms to assess whether the dividend decision is significant to listed as well as delisted firms and if a firm has been delisted due to a financing or an investment decision.


Professor Tarek Ibrahim Eldomiaty
Misr International University

The findings show that: (1) UK firms (both listed and delisted) adjust dividends per share to systematic and unsystematic risks; (2) earnings dictate dividend policy of listed firms alone; (3) leverage, cash flow per share and firm size are significant determinants of dividend policy for the two groups of firms; (4) listed firms lower their dividends at increased levels of cash flow volatility while delisted firms pay higher dividends as their cash flow volatility rises; (5) there is strong evidence in support of transaction cost theory for the listed firms; (6) the life cycle and residual theories cannot explain dividend policy in UK firms; (7) the general conclusion is that the differences in dividend policies of listed and delisted firms are quite minor indicating that if firms have been delisted; dividend decisions are not a significant factor

Read Publication

The following have contributed to this page: Professor Tarek Ibrahim Eldomiaty