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Prior Payment Status and the Likelihood to Pay Dividends: International Evidence


  • I thank the anonymous referee for helpful comments.

Corresponding author: Department of Finance, School of Business, National Chengchi University, 64, Section 2, Chi-Nan Road, Taipei, Taiwan; Phone: 886-2-29387501; Fax: 886-2-29393394; E-mail:


By using the signaling model and the life-cycle theory, I examine the importance of prior payment status in determining the likelihood to pay dividends. I categorize firms into those that paid dividends previously and those that did not. My results show that strong dividend stickiness exists and the determinants to pay differ significantly for the two groups of firms. High growth and low insider holdings make prior payers more likely to pay but prior nonpayers less likely to pay. Furthermore, prior payers are more sensitive to profitability and earned/contributed equity mix, while prior nonpayers are more sensitive to risk and dividend premiums. Finally, taking the prior payment status into account eliminates the problem of overestimating the portion of payers put forth by previous studies.