The Drivers of Dividend Policies in Europe

Dividend policy theories have been extensively studied by academics and practitioners, from the irrelevance theory of Miller and Modigliani (J Bus 34(4):411–433, 1961) to other complementary or conflicting theories. This paper aims to understand which dividend policies theories drive the distribution of dividends for listed companies traded on the main European markets. Through an OLS regression model, we study the determinants of dividend payments for companies included in nine European stock market indexes for the period 2001–14 (panel data). The results of the analyses suggest that there are still many drivers of companies’ dividend policies, confirming the Black’s “dividend puzzle” (J Portf Manag 2(2):5–8, 1976). Whilst the agency cost theory does not explain European dividend policy, we provide evidence that pecking order theory, signaling theory, and bird-in-the-hand theory complementarily explain dividends’ payments.