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Title
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Intra-industry conformity in dividend policy
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Author
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Abstract
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| Purpose The purpose of this paper is to study the impact of intra-industry conformity tendencies on dividend policy among a large sample of US firms. Design/methodology/approach The paper explores mimetic influences on dividend policy. Consistent with prior institutional research, the paper measures mimetic pressures as institutional prevalence or the pervasiveness of a feature of dividend policy within a firm's relevant environment. Findings The results reveal a significantly positive relationship between the lagged density of firms in the industry that pay a dividend and the probability of a focal firm paying a dividend. Moreover, for firms paying a dividend, results indicate that higher similarity in dividend payout among firms in the same industry induces more conformity between a focal firm and average industry practice. Overall, results are consistent with imitation in dividend policy. Research limitations/implications The results support the view that future research on dividend policy should value social and behavioral factors more explicitly in order to arrive at a more overall and consistent explanation of firms' dividend policy. Moreover, the results also illustrate the relevance of alternative theories in explaining dividend policy. Practical implications The results show that intra-industry benchmarking of dividend policy plays a significant role in the USA. Originality/value This study documents the relevance of social imitation mechanisms behind dividend payout behavior and therefore adds to the current knowledge of the impact of behavioral processes on dividend policy. |
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Language
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English
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Source (journal)
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MANAGERIAL FINANCE
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Publication
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2011
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ISSN
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0307-4358
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Volume/pages
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37
:3
(2011)
, p. 492-516
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Full text (publisher's version - intranet only)
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