The perception of dividends by Canadian managers: new survey evidence

Purpose – The purpose of this research is to analyze survey results on the perception of dividends by managers of dividend‐paying firms listed on the Toronto Stock Exchange (TSX). Design/methodology/approach – Managers from a sample of 291 dividend‐paying TSX‐listed Canadian firms were surveyed about their views on dividends. Findings – The most important factors influencing dividend policy are the level of current and expected future earnings, the stability of earnings, and the pattern of past dividends. Despite dramatic differences in the level of ownership concentration between Canadian and US firms, their corresponding managers' views on the determinants of dividends are similar. Canadian managers believe that dividend policy affects firm value but express little agreement with the theory of a residual dividend policy. They express strong support for the signaling and lifecycle explanations for paying dividends, but not for the bird‐in‐the‐hand, tax‐preference and dividend clientele, agency cost, or catering explanations. Compared with non‐dividend payers, Canadian dividend‐paying firms are significantly larger and more profitable, have greater cash reserves and ownership concentration, and have fewer growth opportunities. Originality/value – This study updates and expands previous survey‐based research on dividends and provides new evidence from managers of Canadian firms.