In Search of Lost Dividends: An Empirical Study on Swedish Listed Firms' Propensity to Pay 1966-2001

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As for NYSE-listed firms, the fraction of Swedish-listed firms that pay dividends has declined over the last decades. Applying a unique and extensive database, this thesis uses the Fama and French (2001) framework to describe and explain the decline in payer percentage among Swedish-listed firms. Firm characteristics are evaluated as dividend payment predictors and the importance of individual firm characteristics in dividend payment decisions is scrutinized. The thesis confirms the expected strong dividend driver quality of firm characteristics such as profitability, firm size and leverage, while revealing owner characteristics as unimportant to dividend decisions. This is an important result, since owner characteristics in Sweden are considered highly unusual and are therefore often attributed a wide explanatory power over various corporate finance issues. The thesis presents no evidence of any effect of the declining propensity to pay that Fama and French discovered among American listed firms. It seems instead that changing firm characteristics provide the key explanation to the decline in payer percentage. Swedish firms are found to omit dividends liberally when incurring temporary losses, only to revert to paying dividends when profits return. The thesis suggests that Swedish firms do not pay ...