The purpose of this study has been to investigate whether there is a relation between payout ratio and earnings growth for firms listed on OMXS30 between the years 2008 and 2017. The study aims to investigate the contradiction between established theories and later research. The established theories can be divided into two camps, those who believe there is no relation between the two and those who believe the relationship to be negative –higher payout ratio results in lower earnings growth. Later research shows empirical results that contradict the established theories and suggest that the relationship is positive, higher payout ratio results in higher earnings growth. The method used was quantitative and the empirical material has been collected from the firms' annual reports. In the study, 24 companies and 528 observations have been used, which were then analyzed with a regression analysis. The results show that there is a strong relation between payout ratio and earnings growth, with an R-square value of 0.779 to a confidence level of 99.9%. The relationship, however, is not linear according to established theories or later research, however it is in this study found to be polynomial. We therefore find support for the later research up to the regressionline's maximum value at the payout ratio 87%, after which the relationship is negative. The reason for a negative relationship after this point is likely due to dividend smoothing. Maturefirms with a large share of institutional owners showed a tendency of continuing to pay out dividends even though this cannot be justified by the achieved earnings. We also find that firms that raise their payout ratio achieve higher earnings growth as long as the increase can't be attributed to dividend smoothing.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:sh-35460 |
| Date | January 2018 |
| Creators | Kaya, Jakob, Gunnarsson, Simon |
| Publisher | Södertörns högskola, Företagsekonomi, Södertörns högskola, Företagsekonomi |
| Source Sets | DiVA Archive at Upsalla University |
| Language | Swedish |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
Page generated in 0.0021 seconds