Dividend payout and working capital: evidence from the London Stock Exchange : A thesis submitted in partial fulfilment of the requirements for the Degree ofDoctor of Philosophy at Lincoln University

Abstract

This study examines the impact of earnings and working capital on dividend payouts, using a sample of 1,575 firms listed on the London Stock Exchange, for the period of 1991 to 2015. The results show that current earnings have no statistically significant impact on firms’ dividend payouts. However, working capital significantly affects dividend payouts. In particular, we find that there is an “inverse U-shape” relationship between working capital and dividend payouts. Similar results are also found in our sub-sample estimations. Our findings highlight the importance of considering working capital as a determinant in designing corporate dividend payout policy.