The Determinants of Dividends Payments in the UK, Germany, Italy and France

"This paper applies Lintner's ""partial adjustment model"" to the UK, German, Italian and French companies in order to identify and examine the relative rudiments of dividend policy in Europe. It identifies how companies in Europe determine dividend payments, what level of dividends managers considered to be optimal and how quickly companies in each country adjusted their dividend payout ratios to achieve the optimal ratio. The results suggest that European firms like their US counterparts used their existing dividend rate as a benchmark when deciding to change dividends; managers were careful to ensure that companies are able to sustain dividend increases as they tried to avoid the punitive actions of shareholders for substantial dividend cuts; and the dividends of large companies are cautiously and partially adjusted upward at a fraction of current earnings growth. The relativity of the dividend policy across Europe, principally among large companies, also provided support for many of the theories of dividend policy."