The Firm Life Cycle Theory and Payout Policy: Inter-Country Comparison

The current thesis contributes to verification of life cycle theory of dividends in such countries as Brazil, Italy, Russia and UK based on research of payout policy determinants, both internal and external denoted by financial indicators of enterprises from various industries and macroeconomic factors at different organizational life-cycle stages, namely, growth, maturity and decline covering 2010-2019 time-period. Exceptional value of this analysis is testing Lintner model of dividend smoothing for all levels of corporation’s lifespan and exploring the influence of personal tax on dividends and spread of long-term and short-term interest rates (SPR) on payout ratio in the highlighted countries. Additionally, an attempt to attribute the retrieved outcomes to historical prerequisites was made. The key findings dictate that anglo-saxon law system is presumably not consistent with life cycle theory of dividends on the example of UK, whereas civil law system is. Furthermore, the present dissimilarities may be assigned to the degree of ownership concentration in companies in examined countries: UK follows corporate governance model W, characterized by disperse structure of ownership, while in Brazil, Italy and Russia “family” organizations, which adopt model of corporate governance B, are prevalent, tracking to diverse entities of agency conflict in the countries. In Italy and UK inflation rate and GDP growth have positive and negative impacts on payout ratios respectively, whereas the influence of personal tax on dividends differs, being significantly negative for UK and significantly positive for Italy. The coefficient of SPR appeared to be significantly negative for Italy, contradicting our standard anticipations. The relationship between dividend payments and PE ratio was confirmed to be positive nearly for all life-cycle stages in Brazil, Italy and Russia, while for UK a strongly significant negative relationship between these indicators was established for maturity stage. Besides, it was demonstrated that businesses in countries adopting common, that is anglo-saxon, legal system are not prone to smooth dividends as it is shown in previously conducted researches, though are cautious and rational.