Determinant Factors of Dividend Payments in Brazil

This study identifies factors that shaped cash disbursement distribution policies employed by Brazilian public companies listed on the Brazilian Securities, Commodities and Futures Exchange (BM&FBOVESPA) from 1995 to 2011. Relationships between Dividends/Total Assets and potential determinants discussed in the literature, including firm size, corporate governance, profitability, leverage, market to book, liquidity, investment, risk, profit growth, information asymmetry and agency conflict, are examined. The following econometric methods are employed: (1) Tobit, given the nature of the dividend data, and (2) the Generalized Method of Moments (GMM) to control for endogenous regressors. Significant positive variables found include size, return on assets (ROA), market to book, liquidity and profit growth. It can thus be inferred that larger firm size, profitability, market value, liquidity and profit growth correlate with greater firm pro pensity to distribute money to shareholders, thus supporting the theory of corporate finance. Significant negative variables found include leverage, liquidity squared, capex, beta and tag along 100%. It is thus inferred that more significantly leveraged companies that invest more heavily in fixed assets and that exhibit high liquidity, higher risk and less conflict between controlling and minority shareholders will be less likely to pay dividends to shareholders.