Why are dividends disappearing? An international comparison

I analyze corporate dividend decisions in the U.S., Canada, U.K., Germany, France and Japan. The proportion of dividend payers declines in all countries in the last decade. The sharpest decline occurs in the U.S., and the smallest in Japan. In all countries, the changes in the proportion of payers are not fully explained by changing firm characteristics, which indicates a decline in the propensity of firms to pay dividends. Extremely high concentration of assets, earnings and dividends among relatively few large firms in all countries questions the validity of equilibrium clientele and signaling explanations of the phenomenon. Testing of the catering explanation yields results inconsistent with the theory. I also find no significant relationship between propensity to pay dividends and share repurchases. The robustness of the phenomenon across countries is consistent with an agency cost explanation related to the advances in international corporate governance in recent years.