Dividend Smoothing: An Empirical Analysis Based on Various National Differences

This paper investigates how different national characteristics affect firms’ dividend smoothing around the world. Firstly, consistent with prior literature, known firm-level determinants of dividend smoothing support the agency-cost explanation of it, rather than the information-asymmetry one. Secondly, country-level determinants, i.e. investor protection, financial systems, legal regimes, culture, religion, are put in regressions. Firms in countries with stronger investor protection smooth dividends less, which supports the ‘substitute model’ (La Porta et al., 2000). Firms smooth dividends more in market-based countries, in common-law countries, in more individualistic, masculine, uncertainty-avoiding, indulgent countries, and in Protestant countries. Finally, therefore, collecting the national characteristics that have positive effects on dividend smoothing, we come to adumbrate the Englishspeaking Anglo-Saxon world where firms smooth dividends the most.